I hate overdraft fees. They are the classic example of a product that is a win-lose proposition. The bank wins and the customer loses. In today’s world of transparency and accountability we are seeing a movement away from overdraft fees. This movement is being led by the digital challenger banks.
But first let’s look at the problem. The Center for Responsible Lending reported that large banks (those with over $1 billion in assets) earned $11.45 billion on overdraft fees in 2017. I have also seen studies that peg this number at $15 billion or even more when you include all banks and credit unions. Regardless, it is a very high number.
Now, those of us with healthy checking accounts can be blind to this problem. But it is real for tens of millions of Americans. And for those that incur overdraft fees it is rarely a one-time event. They will spend hundreds of dollars a year on these fees. And it shouldn’t be that way.
Many of the new challenger banks are making a name for themselves by promoting a new approach to fees. They are determined to create financial products that are good for consumers’ financial health. And one of the first things to go is the overdraft fee.