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Among the many annoying fees charged by banks, overdraft and overdraft “protection” fees can seem particularly infuriating: a $4 coffee can turn into $40; moving your own money from one account to another can be costly.
Fortunately, that has changed. In the past week alone, Bank of America and Wells Fargo have become the latest major banks to join the growing trend that is a boon to their customers, at least on the surface: reducing or eliminating overdraft fees and Insufficient Funds (NSF).
Bank of America announced it would reduce its overdraft fee — what it charges customers who withdraw more than the amount available in their checking account — from $35 to $10 starting in May. It will also eliminate the overdraft protection fee – what it charges customers when it transfers money from a linked account to cover an overdraft.
Wells Fargo will also eliminate its overdraft protection fee and give customers a 24-hour grace period to cover an overdraft before they incur charges. And just last month, Capital One eliminated overdraft and NSF fees, which are similar to overdraft fees but generally apply to payments, like checks, that don’t go through because they would result in a negative balance. .
This is quite a change for the big banks, which rely on these fees to make a lot of money. But it’s good news for customers, who will enjoy a break on fees that previously cost an average of $33.58, according to research from personal finance site Bankrate, and can be charged multiple times a day. Now, if you mistakenly overdraw buying this coffee, you won’t necessarily end up paying for it multiple times. Instead, you will pay less or not at all.
The changes come shortly after the Consumer Financial Protection Bureau (CFPB) announced it was planning a “range of regulatory interventions” for institutions that rely on overdraft fees as their primary source of revenue, saying that are particularly expensive for those who can least afford to pay for them.
Not all banks have removed or changed these fees, and it’s up to you to familiarize yourself with your institution’s rules. Only the banks mentioned above take three different approaches.
More banks may announce changes to their overdraft policies, in part because of the CFPB, and because they don’t want to lose customers to the banks that cut them, said Ken Tumin, founder and editor. from DepositAccounts.com, to CNBC. Do it. With the emergence of online-only banks like Ally – which generally charge less fees than brick-and-mortar banks – there are more players than ever.
Of course, the banks wouldn’t just eliminate a major source of revenue without planning to catch it up one way or another: you should be on the lookout in case the banks try to catch up with the money. raising other fees or levying new ones, Tumin says. Monthly maintenance costs for checking or savings accounts may increase, for example, or they may start charging for paper statements, if they aren’t already.
Still, the changes are good news for those who made the costly mistake of going short on their account.
If your bank charges overdraft fees, you can usually disable overdraft protection. In this case, any purchase exceeding your account balance will be declined. You can also set low balance alerts, which can help you avoid them. However, this tactic would not necessarily prevent a check from bouncing.
Or, you can switch to a bank that doesn’t charge overdraft fees, like Ally or Capital One. Discover, KeyBank, Wealthfront and others offer free checking accounts that do not allow customers to incur overdraft fees. Chances are that this list will grow in the near future.
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Don’t miss: Capital One eliminates overdraft fees
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