Bank of America announced on Tuesday that, starting in May, it will cut overdraft fees — incurred when customers use their debit cards with insufficient funds in their accounts — from $35 to $10. And non-sufficient funds (NSF) fees, which are levied in the case of a rejected transaction or bounced check, will be eliminated completely.
Consumer-advocacy groups have been calling for reduced penalties, saying overdraft policies disproportionately affect vulnerable and low-income Americans. A report released by the Consumer Financial Protection Bureau last month found that out of an estimated $15.5 billion collected in overdraft and NSF fees in 2019, fewer than 9% of consumer accounts pay 10 or more overdrafts per year, contributing close to 80% of all overdraft revenue.
“Over the last decade, we have made significant changes to our overdraft services and solutions, reducing clients’ reliance on overdraft, and providing resources to help clients manage their deposit accounts and overall finances responsibly,” Holly O’Neill, Bank of America’s president of retail banking, said in the company’s statement.
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Bank of America isn’t the only major financial institution making significant fee changes. Both JP Morgan Chase and Capital One have reduced or eliminated similar fees that often catch customers off guard. And, following Bank of America’s news on Tuesday, Wells Fargo announced its own policy shift: NSFs will be eliminated by the end of the first quarter, and so will transfer fees for accounts enrolled in overdraft protection.
“This is a brilliant move by [Bank of America] CEO Brian Moynihan,” Michael Moebs, economist and CEO of economic-research firm Moebs Services told MarketWatch. “Moynihan is putting Bank of America’s stake in the ground and telling all depositories and fintechs that BoA is going after their checking business, especially Wells Fargo, Chase and Chime.”
Moebs notes that the pandemic has caused average Americans to keep more money in their checking accounts. Per data from Moebs Services, the average checking balance was $3,698 at the close of 2019, but by the end of 2021, the average balance had climbed to $8,244.
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Bank of America shares have risen over 48% in the last 12 months, MarketWatch reports. In the same period, the Dow Jones Industrial Average is up almost 17%, and the S&P 500 up approximately 23%.