Capital One announced today that it will do away with overdraft and nonsufficient funds fees on its retail accounts, making it the latest in a growing number of banks, neobanks and other financial institutions that are working to ease the cost of consumer banking. The free overdraft protection will be offered to all customers in early 2022, according to the bank.
Overdraft and nonsufficient funds fees tend to be in the range of $30 to $35 per instance, and some banks will charge that fee multiple times a day as a customer keeps overdrafting on transactions. By the time a customer discovers that they’ve overdrafted their account, they may wind up being liable for more than $100 in fees, which mostly tends to hurt people who were already low on funds. Some banks allow free overdraft protection transfers from linked accounts, but other banks charge fees for these transfers.
“This move by Capital One will have tremendous benefits for the most vulnerable consumers,” said Lauren Saunders, associate director of the National Consumer Law Center, in a statement from Capital One. “It’s critical we keep working to make the banking system more inclusive and fair for all.”
Capital One isn’t the first major bank to remove overdraft fees. In 2019, Discover made the move to eliminate all fees on its checking, savings and money market accounts, including its $30 nonsufficient funds fee. Other banks that have recently gotten rid of overdraft and nonsufficient funds fees include Ally Bank and Alliant Credit Union, which just eliminated these fees this year.
Nontraditional institutions such as Chime and SoFi have also opted to remove overdraft and nonsufficient funds fees; and they’ve gone even further by helping customers who are short on their account balances. Chime has added a feature called “SpotMe,” which basically gives qualifying customers a $200 line of credit for overdrafts; that credit gets replenished when customers get a new direct deposit of $200 or more. SoFi has a similar program that lets customers who receive $1,000 or more in direct deposit monthly have up to $50 in fee-free overdraft coverage.