NewsNational News

Actions

Increasing number of financial institutions are eliminating overdraft fees

graphicstock-close-up-on-the-hand-of-man-inserting-debit-card-in-atm-machine-money-cas-SBI-304224182.jpg
Posted at 9:56 AM, Aug 04, 2021
and last updated 2021-08-04 09:59:59-04

More financial institutions are dropping overdraft fees.

They're usually about $35 after running a card with no balance.

Alliant Credit Union will no longer charge customers for this type of short-term loan.

This comes just two months after Ally, an online-only bank, also made the same move.

In 2020, customers in the U.S. were charged more than $12 billion in overdraft fees, according to data from finHealth.

Most people who end up paying these fees are families who live paycheck to paycheck.

“Overdraft fees are highly concentrated among families living on the edge. One in 12 families in America pay $350 a year in overdraft fees,” said Aaron Klein, Senior Fellow at the Brookings Institution.

Klein has researched what overdraft fees mean for banks and found that they’re purely for profit but don't make up a large amount of revenue for most banks.

“My research has found a small handful of banks who make a majority of their profit just on overdraft fees alone. And without strong regulation from the bank regulators, this is going to unfortunately probably continue,” said Klein.

Now that we've seen some financial institutions drop this fee, it's possible that other banks could follow or even lower the fee.

A bill recently introduced in Congress would make it illegal for banks to charge more than one fee per month. It would also require that the fees are proportional to the amount of the overdraft and the actual cost to the bank for providing coverage for the transaction.