That $5 Latte Is Now Less Likely to Cost You $35 in Overdraft Fees

July 30, 2014
Washington Post 
overdraft news
Some of the largest U.S. banks have worked to reduce customers' chances of incurring overdrafts. Research firm Moebs Services reports that 52 percent of banks with $50 billion-plus in assets have what is called a "de minimis" balance, or an overdraft threshold. For example, an account holder who overdraws by $6 at a bank with a $8 de minimis will not have to pay a fee.

The overdraft threshold ranges from $1 to $50, but more than a quarter of national banks use the national average of $7.40 as the de minimis amount. Six years ago, by comparison, fewer than 1 percent of banks had a de minimis balance in place. Additionally, about two-thirds of big banks today limit how many times a customer can incur overdraft fees in one day. These caps range from two to 12 fees daily.

The protections arose following a series of consumer lawsuits over wrongful overdraft charges and new federal regulations that require consumer consent for overdraft services. Bank of America eliminated overdraft completely after spending $410 million in 2011 to resolve a related case, and JPMorgan Chase stopped charging overdraft fees for transactions under $5 after paying $110 million in a 2012 settlement.

Overdraft changes have also been encouraged by increased competition from Wal-Mart, T-Mobile, and other companies. The competitors are entering banking territory by offering prepaid debit cards that can be used to pay bills, make purchases, and deposit checks.

Abstract News © Copyright 2008-2013 INFORMATION, INC.
Powered by Information, Inc.

Stay Updated

Join the fight against predatory lending. Enter your e-mail to sign up for breaking news, action alerts, and CRL's original research.

   Please leave this field empty

Help Us End Predatory Lending

Predatory lending destroys family wealth, and preys on our most vulnerable communities. You can help us end abusive lending practices by donating to CRL, or by sharing our work with others.