Truist eliminates most of its overdraft fees
- Truist plans to launch two checking accounts with no overdraft fees and eliminate most existing fees.
- Truist estimates that all of the changes will save its customers $300 million a year by 2024.
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The news: Truist plans throw two
no overdraft fees this summer, and coupled that with the removal of most overdraft fees for existing customers in the coming months.
More on this: A product with no overdraft fees is called the Truist One checking account, with additional features such as:
- A balance-based line of credit up to $750, available to all eligible customers.
- A $100 negative balance stamp, which is for eligible customers.
- A premium rewards component.
Truist’s other unnamed account is designed as an alternative to financial products like payday loans and cash checks. The company added that it will “bring many more households into traditional banking and create a pathway to transition to Truist One.”
The bank is also getting rid of its existing fees for overdraft protection transfer, returned items and negative account balances. Truist estimates that all of its overdraft changes will save its customers $300 million a year by 2024.
Brant Standridge, head of retail banking at Truist, said the bank’s changes were the result of a months-long process that began with asking customers for feedback. Standridge also highlighted how the changes go beyond overdraft avoidance, citing access to credit and rewards features.
Trend research: Truist is the latest a host of major US banks to announce that it is limiting clients’ exposure to overdraft.
- Wells Fargo unveiled five changes last week, including the elimination of the insufficient funds (NSF) fee, the addition of a 24-hour grace period, and short-term loans up to $500.
- Also last week, Bank of America announcement that he would end his NSF fee while reducing his overdraft fee from $35 to $10.
- JPMorgan Chase noted last month it ended its item return fee and increased the dollar amount customers can find out before incurring a fee.
The big takeaway: The magnitude of the changes made by Truist shows that it is not only about reducing overdraft fees, but also about helping the types of customers who may have counted overdraft their accounts to obtain short-term
Offering deposit-based lines of credit and a cash buffer are two important ways the bank can move people to other sources of assistance. Additionally, the addition of a credit option for eligible customers gives Truist a way to replace lost fee revenue.
These changes give other banks a model for phasing out overdrafts while ensuring they don’t let some customers trade one problem (fees) for another (trouble paying bills):
- This compromise is why JPMorgan has refused to completely eliminate overdraft fees despite reduced exposure.
- The American Bankers Association (ABA) also expressed concern over the abandonment of overdraft fees in a letter at the Consumer Financial Protection Bureau (CFPB), which recently warned that it will suppress the practice.
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