A number of big U.S. banks - pressured by lawmakers and regulators - are taking steps to rein in the money earned from overdraft fees. Such fees typically hit poorer Americans short of cash in their accounts.
Overdraft has its origins in banks providing a service — for a fee — to customers who may have not balanced their checkbook correctly and wanted a bank to honor a purchase. But the widespread use of debit cards changed this courtesy into a routine source of revenue. Some banks took advantage, for example, by reordering customers’ transactions, deducting big transactions first so that smaller payments would then trigger multiple overdraft fees.
Industry revenue from overdraft fees held fairly steady until last year when banks waived fees across the board in the first months of the pandemic, when millions of Americans lost their jobs and businesses were shuttered. Revenue from overdraft fees fell to $8.82 billion last year from $11.68 billion in 2019, according to data collected by S&P Global Market Intelligence.
JPMorgan Chase, the nation’s largest bank by assets, earlier this year waived overdraft fees for customers whose accounts were overdrawn by $50 or less at the end of the business day. Last week, the bank said it will give customers 24 hours to bring their accounts back to $50 or less overdrawn to avoid a fee.
“It was the right thing to do,” said Diane Morais, president of consumer and commercial banking products at Ally Bank.
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