Anything For You All: Banks might want to think twice before raising overdraft fees

Minggu, 03 November 2019

Banks might want to think twice before raising overdraft fees

NEW CHART: Banking

Banks could soon be motivated to raise overdraft fees — here's why they might want to think twice…

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Overdraft fees at major US banks have risen over the last few decades, but fees have leveled off in recent years. The average overdraft fee increased from $21.57 in 1998 to $33.36 in 2019, meanwhile, the average insufficient funds fees increased for the 19th time in the past 21 years, per Bank Rate's 2019 checking account and ATM fee study.

However, regulators under the Trump administration have shown signs of softening overdraft scrutiny, which could encourage banks to raise fees further. The Consumer Financial Protection Bureau (CFPB) has signaled a potentially softer approach toward banks, as it's reviewing its overdraft rule that requires banks to get customer permission before charging penalties to determine if emerging factors like the increasing use of mobile banking make it unnecessary. The review comes as the CFPB has taken a less active approach to policing banks overall during the Trump administration.
But banks might want to think twice before raising fees as challengers release accounts with no overdraft fees. In the last few months, several US-based neobanks have introduced no-fee offerings, which could be a big draw for consumers fed up with overdraft fees. For instance, Varo recently introduced a no-fee overdraft program, which allows customers to overdraw up to $50 without being charged, and neobanks Dave and Chime also launched similar offerings. These neobanks likely expect to make up for missed overdraft revenue in other ways, preferring to prioritize customer acquisition over monetization in this particular space.

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