Bank of America Overdraft Fees Fell 90% Since Last Year. This Is Why.
- Bank of America changed how it handles overdraft fees and non-sufficient funds fees -- resulting in a 90% drop in overdraft fee revenue.
- With these changes, customers get to keep more of their money.
Bank of America's overdraft fee revenue dropped 90% -- here's why.
Banks make money by charging checking account fees. Many banks still charge fees when customers overdraw their accounts. These fees can be costly and harmful to bank customers -- especially those who are already struggling financially. Bank of America recently announced that its overdraft fee revenue has fallen significantly since last year.
An overdraft fee may be charged when you make a purchase or payment, and there isn't enough money in your checking account to cover it. If the charge goes through, despite you not having the funds to cover the cost, a fee is charged.
Many banks also charge non-sufficient funds (NSF) fees. A payment may be rejected if you don't have enough money in your bank account. When this happens, your bank may charge a non-sufficient funds fee.
According to the Consumer Financial Protection Bureau, the average consumer pays more than $250 yearly on overdraft fees and non-sufficient fund fees. That's a lot of money!
But some banks are making changes to how they handle overdraft fees. One bank that has made changes to its practices is Bank of America.
Bank of America overdraft fees drop 90%
Bank of America announced that fees related to overdraft services declined 90% in June and July compared to the same period in the prior year.
In January of this year, the company discussed its commitment to policy changes regarding its overdraft services. However, these changes didn't go into effect until February and May.
In February, Bank of America made these changes:
- Non-sufficient funds fees were eliminated.
- The ability for customers to overdraw their accounts at an ATM was disabled.
In May, Bank of America made these changes:
- Overdraft fees were reduced from $35 to $10.
- Overdraft protection transfer fees ($12) for Balance Connect accounts were eliminated.
These changes are welcome news for Bank of America's 35 million consumer checking account customers. The above policy changes resulted in a significant decrease in the company's revenue made from overdraft and non-sufficient funds fees.
Other banks are making fee changes
Bank of America isn't the only bank changing its practices. Many banks are reducing or eliminating the overdraft fees that they charge customers.
In December 2021, Capital One announced it would eliminate overdraft fees immediately.
In January 2022, Wells Fargo announced its plan to eliminate non-sufficient funds fees and overdraft protection fees by the end of the first quarter.
Hopefully, more banks will change their overdraft services practices so consumers can keep more of their hard-earned money.
How banks handle overdrafts varies greatly. Knowing your bank's overdraft practices is important. If you're unaware of your bank's fees, you may end up paying them.
Bank fees can add up quickly and greatly impact your personal finance situation.
If you're unhappy with your bank's fee practices or want to open a new checking account with minimal fees, review our list of best checking accounts.
These savings accounts are FDIC insured and could earn you 11x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2023 The Ascent. All rights reserved.