Bank overdraft fees hit record highs during pandemic

Bank overdraft fees hit record highs during pandemic

Overdraft fees that banks cost for withdrawals exceeding funds in a checking account grew to their highest quantity ever final yr, as American households struggled financially during the coronavirus pandemic. 

The typical charge for overdrawing an account was $33.58, a 22-cent improve over the previous two years, in line with a Bankrate survey launched Wednesday. 

Amongst main U.S. cities, individuals dwelling in Philadelphia, Baltimore and Houston final yr paid the very best overdraft fees at greater than $35. Cincinnati, Los Angeles and St. Louis paid the bottom fees at round $31, the survey revealed. 

The easiest way to keep away from these fees is to concentrate to your accessible steadiness, stated Greg McBride, Bankrate’s chief monetary analyst within the report. 

“But slip-ups occur so put in a line of defense by establishing a link between your checking account and savings account at the same bank so that money is immediately transferred into the checking account to cover any shortfall,” McBride stated. 

Large U.S. banks have generated about $9 billion yearly in income from overdraft, ATM and different fees in recent times, in line with the Center for Accountable Lending. The fees have turn into considerably of a money cow over the previous 20 years, stated Rebecca Borné, senior coverage counsel on the middle.

Fees affect low-income shoppers, individuals of shade most

Some federal lawmakers are pushing to shrink these billions, arguing the fees are syphoned primarily from low-income prospects and households of shade. 

Elizabeth Warren, talking at a Senate Banking Committee listening to in Could, condemned the CEOs of main banks for a way a lot cash their firms generated in banking fees during the pandemic. The Massachusetts Democrat stated prospects at Bank of America, JPMorgan Chase, Citigroup and Wells Fargo paid a mixed $4 billion in overdraft fees, with low-income shoppers and folks of shade paying a lot of the fines. 

McBride famous that some fintech firms supply checking accounts free from overdraft fees and people choices “are worth considering for those with more than the occasional overdraft.”

In June, Ally Bank introduced it’ll not cost its $25 overdraft charge it doesn’t matter what sort of account a buyer holds. Alliant, Uncover and Areas have additionally ditched overdraft fees.

Bankrate’s survey, which additionally examined different prices related to protecting a checking account, discovered that the typical charge for utilizing an out-of-network ATM fell to $1.51, a 10-year low. The variety of checking accounts that don’t cost a month-to-month upkeep charge are on the rise as effectively, Bankrate stated. 

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