Overdraft Revenue Fell Nearly 10 Percent in 2020
Overdraft revenue fell by nearly 10 percent in 2020—the first time in six years—largely attributed to pandemic-related resources that helped Americans save money and pay off debt. Financial firms brought in roughly $31.3 billion in overdraft revenue throughout the year, according to financial-data firm Moebs Services Inc.
Early on in the pandemic, many banks waived some overdraft fees, as lenders feared a massive surge in delinquencies. However, more people could start accumulating overdraft fees as stimulus checks and extended unemployment benefits end.
JPMorgan Chase said it waived more than $400 million in overdraft fees in 2020 and the first quarter of 2021. However, it still brought in $1.46 billion in overdraft fees last year, which was criticized by Senator Elizabeth Warren (D-Mass.) at a recent Senate committee hearing. “You and your colleagues come in today to talk about how you stepped up and took care of customers during a pandemic, and it’s a bunch of baloney,” she said.
According to the Wall Street Journal, U.S. Bancorp saw first-quarter service charges ⎯ which include overdraft fees ⎯ fall 23 percent from the year before, and KeyCorp experienced charges falling 13 percent.
Alternatively, some banks are introducing products that are more lenient on overdrafts, like PNC Financial Services Group’s “Low Cash Mode,” which will give virtual-wallet customers a full day to settle overdrafts before they are charged. Also, Fifth Third Bancorp launched Fifth Third Momentum Banking, which will give customers more time to make deposits to avoid overdraft fees.
Though overdraft revenue may increase again as pandemic-related resources fade out, Aaron Klein, a senior fellow in economic studies at the Brookings Institution, said he was “hopeful that some banks are moving away from the product and structuring accounts to treat their consumers more fairly.”