Bank Of America Cuts Overdraft Fees, Eliminates Insufficient Funds Fees

[Hydrogen]

Bank of America said Tuesday it would eliminate insufficient funds fees and cut overdraft fees from $35 to $10—the latest move from a large bank away from the practice amid years of pressure from critics who say the fees unfairly target vulnerable communities.

KEY FACTS

Bank of America plans to end non-sufficient funds fees in February, and reduce overdraft charges by $25 in May, the bank said in a press release.

The changes will lead to a 97% reduction in overdraft revenues from where they were in 2009, according to Bank of America.

The bank said it has slowly reduced its overdraft fee practices, including cutting overdraft fees tied to debit card purchases in 2010, and creating a checking account that did not allow customers to overdraft in 2014.

CHIEF CRITIC

Critics have called for overdraft fees to be eradicated for years, saying they disproportionately affect people of color and people living paycheck to paycheck. Sen. Elizabeth Warren (D-Mass.) has been an advocate for eliminating the fees. She blasted JPMorgan Chase CEO Jamie Dimon for the bank collecting nearly $1.5 billion in overdraft fees in 2020 during a Senate hearing last year. “You and your colleagues came in today to talk about how you stepped up to help your customers during the pandemic,” Warren told Dimon during the hearing. “It's a bunch of baloney.”

TANGENT

Capital One became the first large financial institution to completely end overdraft fees in December, joining some smaller banks that have moved away from the practice. Ally Bank announced it would end the practice in June, citing the impact on low-income Americans and people of color.

BIG NUMBER

$15.47 billion. That’s how much U.S. banks made from overdraft and non-sufficient funds fees in 2019, according to a report from the Consumer Financial Protection Bureau. Bank of America, Wells Fargo and JPMorgan Chase accounted for 44% of the total, Reuters reports.


https://www.forbes.com/sites/annakaplan/2022/01/11/bank-of-america-cuts-overdraft-fees-eliminates-insufficient-funds-fees/?sh=7d62ef6e53f2

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The official narrative says: banks are removing these fees due to them having a negative impact on minorities and vulnerable communities

Could there be another explanation for this move, in terms of banks seeking ways to be more competitive with cryptocurrencies and 3rd party payment apps?

While cryptocurrencies may never completely replace banks. They could benefit consumers by encouraging traditional finance to offer better terms and services. Perhaps market competition isn't such a bad thing after all?

[franky1]

nah.
overdrafts were seen as 'extra credit/debt' without the creditcard application form requirement. what you find is by limiting access to overdraft, causes those on low incomes to then apply for credit cards in tough times, to pay off unavoidable bills.

and then having a credit card with higher limits people end up getting into more debt(profit for bank) because people then tend to max out their limit thinking its 'free cash' to not worry about for months.

its like all economics.
if someones income is only say $1500. but they have payment demands/bills/lifestyle costs of $1700. they usually use a overdraft to pay the $200 excess, and try to recoup the next month.. by only spending 1300 on lifestyle and put $200 to zero the overdraft(not always possible)

but if banks only limit access to the $1500 income, people then go elsewhere to get hold of $200 to pay off unavoidable bills. and if the 'elsewhere' is offering another $1500 'on credit' people usually take the $1500 extra credit and buy silly things like luxuries thinking they can pay back $130 a month for the next year.. but never do because they are still only getting $1500 of income and still having $1700 bills. so each month the debt increases.

having a $200 overdraft 'credit' taken away and then offered a $1500 credit card. tempts people to 'spend' $1500 credit. instead of staying under the $200 'credit'(overdraft) allowance from previous years

[hugeblack]

If people don't change their financial behavior, banks will find another way to give people more free money (a loan) which users will fail to repay.

I do not think that the reason is the competition of cryptos, but perhaps pressure from the political parties in the US administration, especially since the Biden administration is trying to win over some voters.

Banks will not enter into competition with cryptocurrencies soon, and therefore you will not need to worry about this.

[NotATether]

nah.
overdrafts were seen as 'extra credit/debt' without the creditcard application form requirement. what you find is by limiting access to overdraft, causes those on low incomes to then apply for credit cards in tough times, to pay off unavoidable bills.

and then having a credit card with higher limits people end up getting into more debt(profit for bank) because people then tend to max out their limit thinking its 'free cash' to not worry about for months.

its like all economics.
if someones income is only say $1500. but they have payment demands/bills/lifestyle costs of $1700. they usually use a overdraft to pay the $200 excess, and try to recoup the next month.. by only spending 1300 on lifestyle and put $200 to zero the overdraft(not always possible)

but if banks only limit access to the $1500 income, people then go elsewhere to get hold of $200 to pay off unavoidable bills. and if the 'elsewhere' is offering another $1500 'on credit' people usually take the $1500 extra credit and buy silly things like luxuries thinking they can pay back $130 a month for the next year.. but never do because they are still only getting $1500 of income and still having $1700 bills. so each month the debt increases.

having a $200 overdraft 'credit' taken away and then offered a $1500 credit card. tempts people to 'spend' $1500 credit. instead of staying under the $200 'credit'(overdraft) allowance from previous years

It boggles my mind why the concept of overdraft still exists, when clearly, the idea of letting your customers take free money from you out of your bank comes at a loss to the banks (as most of the customers will just default on the overdrafts), which eventually puts the banks into a crisis, requiring governments to bail them out!

Putting everyone on debit cards and limiting "overdrafts" to proper bank loans would be really really good for economies even though it isn't feasible.

[kryptqnick]

In my country when you don't have enough money on your account, you usually just get your payment declined and try to figure out what to leave out, so that you can cover your purchase (the vast majority use debit cards with no overdraft allowed). I take it that in the US it's common to use credit money, but you are charged extra for doing that? I'm happy that very rich companies will now be a little less rich, but is it a big change for people? Is the fee fixed, or are there additional things like an interest rate one has to pay, for example? So if there's no overdraft fee, does the bank cover the transaction and then charge this amount of money with 0% interest rate once there's money on the card again?
As for cryptos, if you don't have enough BTC in your wallet, nobody's going to pay up and cover your purchase for you, so I don't think that banks feel at a disadvantage to cryptos in this regard.

[so98nn]

In my country this concept does not even exists anymore. The banks here already know if they started imposing the overdraft limits or minimum balance requirement then this could cause "cash ecosystem" to flourish and thus leading to the black money in the country. The cash I mean here is, most of them will start to keep the salaries in cash mode, leave the banks and do the daily transactions in the form of cash only. Since that is the best way not to get forced to lock up the money in the bank. Why should we anyways as the last dime of it belongs to us?

On the other hand, the peeps here are also receiving too low salaries and thus to keep the minimum balance requirement, it's just not at all possible to them. The best way to eliminate the fear of not using the banks is to not impose such restrictions.

Only the private banks with international standards have been found imposing minimum balance requirement.

[NeuroticFish]

The official narrative says: banks are removing these fees due to them having a negative impact on minorities and vulnerable communities

Could there be another explanation for this move, in terms of banks seeking ways to be more competitive with cryptocurrencies and 3rd party payment apps?

While cryptocurrencies may never completely replace banks. They could benefit consumers by encouraging traditional finance to offer better terms and services. Perhaps market competition isn't such a bad thing after all?

While the banks are still big in the lending business, they get competition there too, from both IFNs and crypto related businesses. Crypto is still small impact, I only mentioned because we're on a bitcoin forum, really.
Their problem is that competition does exist. And we live in an information era. People find out on the internet much easier that they can use other company's similar product with less hassle and less fees.
And the banks have no choice but find some lovely reasons for it and get to cut here and there from the worse fees they have, so they can keep their customers.

[DaveF]

IMO it's due to competition from other places and the resurgence of online / low cost and fee banks.
This happened before about 20 years ago when online only banks started popping up and the old school full service banks slowly started to change their ways to compete.
Then 2008 happened. Over the last 13 years or so the fees & charges have come back and risen and we are seeing other online banking solutions and other products come into existence like cashapp and such. This is just the banks changing again to compete.

BTC and crypto are playing a part in this, but it's just a part. Same way MC and others are getting in processing BTC and crypto. We might not like big banks, or these huge companies, but they are not all universally stupid. They know what they have to do to survive.

-Dave