Bank of America Slashes Fees for Account Overdrafts
Altogether, Bank of America estimates the steps will cut its overdraft-fee revenues by 97% from where they were in 2009, the year before it started taking incremental steps toward reining in overdraft-fee revenues.
For years, it was common that one large bank would increase the fee it was charging for overdraft, which would cause other banks to respond in kind. It remains to be seen whether the decision by BofA — a leader in the retail banking industry — to cut overdraft fees will pressure other banks to take similar measures.
Overdraft has its origins in banks providing a service for a fee to customers who may have not balanced their checkbook correctly and wanted a bank to honor a purchase. But the widespread use of debit cards changed this courtesy into a routine source of revenue for banks. If a customer lacked funds in their account, a $5 coffee could end up costing $35 because of overdraft fees.
For years, BofA has slowly cut back on its overdraft fee practices. It got rid of overdraft fees tied to debit card purchases in 2010 and created a checking account in 2014 that did not allow customers to overdraft. The SafeBalance account is now the bank's most commonly opened account.
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