Ally Financial is completely eliminating overdraft fees on all its bank products, the company said on Wednesday, becoming the first major bank to eliminate overdraft fees across its entire business.
NEW YORK – Ally Financial is completely eliminating overdraft fees on all of its bank products, becoming the first major bank to eliminate overdraft fees throughout its business.
It’s the nation’s 18th largest bank by size, and a big step forward for the industry, which has relied on overdraft fees for decades to boost its profits, often at the expense of poorer Americans who couldn’t pay. Such fees in the first place.
Critics of the practice often cite what they call a $38 cup of coffee, where a bank customer uses a debit card to buy coffee, overdraft, and pays a $35 fee on top of a $3 drink.
In its announcement Wednesday, the Charlotte, North Carolina-based bank specifically cited the impact of overdraft fees on Black and Latino households, who have historically been poorer than their white counterparts and are affected more often with overdraft fees. Huh. It is also a common reason why black and Latino families choose to go “without a bank account,” that is, without a bank account, in order to avoid the fees that often come with having these accounts.
Diane Morris, president of consumer and commercial banking at Alley Bank, said in a statement, “Overdraft fees can be a major cause for concern. It became clear to us that the best way to address that concern is to eliminate those fees. was.”
A spokesman for the bank said the announcement affects about 3.6 million checking, savings and money market accounts. Ally doesn’t expect this to have a major impact on the company’s full-year profit forecast.
In response, the industry is turning away from overdraft fees, reluctantly. Large banks such as Bank of America and Wells Fargo now offer products without overdraft fees, although they come with more limited features than their other accounts. Many banks suspended overdraft fees early last year when the pandemic struck. Other banks, such as regional banking giant PNC, have introduced features to help avoid fees for the first time in their bank products.
Ally, however, is the first major bank to completely get rid of overdraft fees.
But banks still rely heavily on overdraft fees for revenue. According to industry research, the industry collected over $12 billion in overdraft fee revenue last year alone.