Bank Overdraft Fees Hit Record Highs During Pandemic
A recent survey from Bankrate found that Non-Sufficient Funds (NSF, commonly known as overdraft) fees rose to their highest amount ever last year as Americans struggled to make ends meet during COVID-19. The average NSF fee for an overdrafted account was $33.58, a 22-cent increase from the previous two years.
Greg McBride, Bankrate’s chief financial analyst, said that the best way to avoid overdraft fees is for consumers to pay attention to their available balance.
“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,” he stated.
CBS News highlighted that big banks have generated nearly $9 billion annually in overdrafts and other fees. The average overdraft fee is more than twice as much as the average monthly service fee on an interest checking account, which is $16.35. It is also roughly six and a half times more than the average monthly service fee on a non-interest checking account, which comes to $5.08.
Bankrate’s survey noted that it is possible for consumers to be charged with multiple overdraft fees in one day, and frustration over the fees has led to legal attempts to ban them, as well as the creation of banking alternatives that do not charge customers overdraft fees.
“An increasing number of fintech companies and neobanks are offering accounts that do not charge overdrafts and are worth considering for those with more than the occasional overdraft” said McBride.
Senator Elizabeth Warren (D-Mass.) spoke at a Senate Banking Committee hearing in May, criticizing the CEOs of major banks for how much money they generated throughout the pandemic. Additionally, some banks such as Ally, Alliant, Discover, and Regions have already announced that they are eliminating overdraft fees.