Big banks are increasingly making big moves that will put money back in customers' pockets.
Citi is the latest major bank to cut back on controversial fees, telling CNN that it will be eliminating three major fees by this summer: overdraft fees, non-sufficient funds fees, and overdraft protection fees. It will become the first of the nation's five largest banks to do away with all of those fees entirely.
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In January, Wells Fargo announced it will remove fees for bounced checks, otherwise known as non-sufficient funds fees, by March 30. It will also eliminate overdraft fees for customers enrolled in its overdraft protection service. Bank of America announced in December that it is ending fees for insufficient funds starting this month. Capital One ended its overdraft fees at the start of the year, and Ally Bank, one of the most prominent online banks, announced over the summer that it would stop charging overdraft fees.
The decision is a costly one for the banks. Citi reportedly made $70 million in overdraft and non-sufficient funds revenue through the first nine months of last year, according to the Consumer Finance Protection Bureau. Capital One says that getting rid of the fees will cost it $150 million a year, while Bank of America says its revenue from overdraft fees will have dropped 97% from 2009 levels. Banks earned an industry-wide $15 billion from the charges in 2019, according to the CPFB, which has said it plans to crack down on banks that rely too heavily on the fees.
Banks charge overdraft fees when there aren't enough funds in a customer's account to cover an authorized payment. They have been a lightning rod for criticism because they disproportionately affect customers living paycheck to paycheck who are least able to pay them.
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Wells Fargo says it will give customers not using overdraft protection a 24-hour grace period to cover overdrafts before charging a $35 overdraft fee. Customers who receive direct deposits will also be able to access their money up to two days sooner in an effort to cut down on overdrafts, the bank says.
Bank of America will still allow overdraft fees, which are different from insufficient funds fees in that an overdraft transaction is still allowed to go through. However, the bank will reduce the fee from $35 to $10 in May.
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