Big banks have drastically cut overdraft charges, but customers still paid $2.2 billion last year

Big banks have drastically cut overdraft charges, but customers still paid $2.2 billion last year

Pedestrians go a JPMorgan Chase financial institution department in New York.

Michael Nagle | Bloomberg | Getty Images

The three greatest American retail banks collected 25% much less overdraft income last year as the businesses, under pressure from regulators to cap the charges, created new methods for customers to keep away from the penalties.

JPMorgan Chase, Wells Fargo and Bank of America reported a mixed $2.2 billion in overdraft charges in 2023, roughly $700 million lower than the earlier year, in keeping with regulatory filings.

Overdraft fees are triggered when a buyer makes an attempt to spend greater than the stability of their checking accounts. At round $35 per transaction at many banks, the charges have been a profitable line merchandise for the business, producing $280 billion in income since 2000, in keeping with the Consumer Financial Protection Bureau.

The business is girding itself for a battle over overdraft after the CFPB last month unveiled a proposal to restrict costs to as little as $3 per transaction. Banks say overdraft providers are a lifeline that helps customers keep away from worse choices like payday loans, whereas critics together with President Biden say the charges exploit struggling Americans.

The follow has introduced unwelcome consideration to massive banks. During a 2021 listening to, Sen. Elizabeth Warren needled JPMorgan CEO Jamie Dimon on the charges. Dimon on the time refused her name to refund $1.5 billion to customers.

But even earlier than recent efforts by regulators, banks’ haul from overdraft has been on the decline. Pandemic stimulus cash helped Americans set off fewer of the charges beginning in 2020, after which corporations together with Capital One, Citigroup and Ally voluntarily ended the follow.

Those who saved the charges, together with JPMorgan, restricted the sorts of transactions that set off penalties, removed charges for bounced checks and introduced one-day grace periods and $50 cushions to scale back their frequency.

Bank of America cut the charges to $10 from $35 in 2022.

“Whether people eradicated some charges or dramatically diminished the price of others, there’s been very vital shifts right here,” stated Jennifer Tescher, CEO of nonprofit group Financial Health Network. “Banks aren’t simply eliminating overdraft, they’re looking for extra customer-friendly methods of assembly their liquidity wants whereas ensuring they are not overextended.”

Steady decline

Industrywide overdraft income totaled $7.7 billion in 2022, 35% beneath the 2019 degree, in keeping with a May CFPB report that included all U.S. banks with at the least $1 billion in property.

Recent regulatory filings present that the development continued last year, although JPMorgan and Wells Fargo stay by far the most important gamers in overdraft.

JPMorgan had $1.1 billion in overdraft income last year, about 12% decrease than in 2022. Wells Fargo noticed a 27% decline to $937 million. Bank of America posted a 64% decline to $140 million.

More than 70% of overdraft transactions not incur charges, and customers can select accounts that do not enable the penalties, a JPMorgan spokesman informed CNBC. Wells Fargo and Bank of America declined to remark.

“Our customers proceed to inform us they need and wish entry to overdraft safety, which helps them when they’re quickly quick on cash,” the JPMorgan spokesman stated.

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