Bank of America slashes fees for account overdrafts

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Bank of America is cutting the amount it charges customers for overspending on their accounts and plans to eliminate its fees for bounced checks entirely.

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NEW YORK – Bank of America is cutting the amount it charges customers for spending more than the amount in their accounts and plans to eliminate its fees for bounced checks entirely.

It’s the latest move by the nation’s largest banks to roll back overdraft fees they charge longtime customers, fees that often amount to hundreds of dollars a year for overdraft users.

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The bank, based in Charlotte, North Carolina, will cut the overdraft fee it charges customers from $35 starting in May. It will also stop charging for non-sufficient funds – which are levied when it declines a transaction – known as bouncing checks.

While checks are no longer widely used, NSF charges can come from automated payments such as utility bills. The nation’s second largest bank, Bank of America, says that about 25% of its overdraft/NSF fee revenue each year comes from NSF fees.

Overall, Bank of America estimates the move will cut overdraft-fee revenue by 97% from where they were in 2009, before taking incremental steps toward reining in overdraft-fee revenue.

“This is the final leg of the journey,” Holly O’Neill, president of retail banking at BofA, said in an interview. We will still have an overdraft if needed.”

For years, it was common that a large bank would increase the fee charged for overdrafts, forcing other banks to respond in kind. It remains to be seen whether the decision to cut overdraft fees by BofA – a leader in the retail banking industry – will put pressure on other banks to take similar measures.

The bank is also eliminating two small fees. It will no longer allow customers to overdraft their accounts at ATMs and eliminate the $12 fee charged by banks for automatically transferring money from one account to another to cover an overdraft, One who often transfers money from a long-term savings account. Preliminary checks of customers.

Overdrafts have their origins in banks providing a service for a fee to customers who have not balanced their checkbooks correctly and want the bank to honor the purchase. But the widespread use of debit cards turned this etiquette into a regular source of revenue for banks. If a customer’s account is short of funds, a $5 coffee can cost $35 because of an overdraft fee.

Overdraft fees became attractive to the industry but also made banks a target for consumer advocates and regulators. After the financial crisis, Democrats hired the Consumer Financial Protection Bureau and other regulators to rein in overdraft fee revenue.

Over the years, BofA has gradually cut back on its overdraft fee practices. It got rid of overdraft fees associated with debit card purchases in 2010 and created a checking account in 2014 that didn’t allow customers to overdraft. SafeBalance account is now the most widely opened account of the bank.

But BofA and the wider industry were not ready to get rid of overdraft fees completely until recently. Many banks froze fees charged to customers during the first year of the pandemic, and the industry still posted record profits.

So from 2021 onwards some big banks started announcing that they are waiving overdraft charges completely. Large regional banks that effectively eliminated overdraft fees included Associate Banks, PNC, Santander and Capital One.

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