Bank of America is giving its banking customers a break.
The bank announced plans to reduce overdraft fees to $10 from $35 beginning in May and eliminate non-sufficient funds fees altogether as soon as February.
“These latest steps will further support our clients and empower them to create long-term financial wellness,” Holly O’Neill, Bank of America’s president of retail banking said in a statement.
“We remain committed to taking actions that will further bring down overdraft fees in the future and continue to empower clients to drive positive changes to behavior pertaining to overdraft,” she added.
Bank of America is one of the country’s largest banks with 66 million consumer and small business customers and approximately 17,000 ATMs nationwide, according to the company.
“Reducing the overdraft fee from $35 to $10 blazes a trail for other banks to follow,” said Greg McBride, the chief financial analyst at Bankrate.com. “Don’t be surprised if this unleashes a parade of similar announcements in the weeks ahead.”
Last year, Ally Bank also announced it was ditching fees and Capital One said it would eliminate all overdraft fees for retail banking customers starting in 2022.
Overdraft fees are considered one of the most expensive and common checking account fines, since you can get dinged several times in a single day if you spend more money than you have in your account.
The Consumer Financial Protection Bureau found that 5% of checking account holders overdraft more than 20 times per year.
Further, a majority of banking customers who pay overdraft fees are also considered “financially vulnerable” and disproportionately belong to minority groups, according to a separate FinHealth Spend report.
During the Covid pandemic, federal regulators encouraged banking institutions to waive these fees to provide some relief to consumers experiencing severe financial strain, and many banks did offer such hardship accommodations, although only temporarily.
Still, the average penalty hit a record high of $33.47 in 2020. Altogether, Americans shelled out more than $12 billion in fees for bounced checks and overdrafts last year, FinHealth found.