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Citibank has become the latest bank to eliminate overdraft fees.
The nation’s fourth largest bank plans to eliminate overdraft fees, returned item fees and overdraft protection fees this summer, it said in a news release Thursday.
The move also includes nonsufficient funds (NSF) fees, a spokesperson confirmed. Citi said the decision makes it the only top five bank to completely eliminate such fees and would help “increase financial inclusion in underserved communities.”
Overdraft changes have been the trend in banking
Eliminating overdraft fees “is a significant step for Citi as a leader in the banking industry,” said Gonzalo Luchetti, CEO of U.S. Personal Banking at Citi, in the release. “We are continuously looking for ways to utilize our industry-leading capabilities to make the financial system easier and more equitable for communities who have little or no financial buffer.”
Capital One, Ally Bank and Alliant Credit Union announced decisions in 2021 to abolish overdraft fees. In January, Bank of America said it would eliminate its nonsufficient funds (NSF) fee and lower its overdraft fee to $10 from $35, while Wells Fargo said it was eliminating NSF fees.
Important move for consumers
“Another big bank stepping away from overdraft fees is another big win for consumers,” Greg McBride, CFA, Bankrate chief financial analyst, says of Citi’s decision. “The more big banks that make this move, the more it will prod the rest of the industry to do something similar.”
Bankrate’s latest checking account and ATM fee study found that the average overdraft fee was $33.58. U.S. consumers paid an estimated $15.5 billion in overdraft and NSF fees in 2019 — comprising nearly two-thirds of reported fee revenue, according to the Consumer Financial Protection Bureau (CFPB).
A Bankrate survey conducted in December found that Hispanic and Black account holders pay more in checking fees than White consumers. Checking fees for White customers declined 12.1 percent in the past year, while Hispanic and Black checking customers saw increases of 31 percent and 3.2 percent, respectively.
Large fines for illegal overdraft practices
The CFPB said in December it plans to increase its scrutiny of banks’ use of overdraft fees. In recent years, the agency imposed $122 million and $30 million penalties on TD Bank and TCF Bank, respectively, for what it deemed to be illegal overdraft practices.
–Staff writer Karen Bennett contributed to this article.