Capital One joining move to eliminate overdraft fees
Customers who have already opted into Capital One’s overdraft program will be automatically moved to the no-fee version early next year, fully eradicating the $35 fees it could charge up to four times a day.
Capital One said Wednesday that it would stop charging retail customers overdraft fees, making it the latest bank to either eliminate or ease the charges famous for turning $3 coffees into $38 gotchas.
Overdraft programs ensure that a bill will be covered and that purchases won’t be denied when spending exceeds a consumer’s account balance. Initially marketed as a convenience, the fees have proliferated over the past quarter-century and have become known as an aggressive way to siphon money from consumers.
But over the past year, more banks have begun introducing services that provide customers with a bit of wiggle room when they enter overdraft territory.
In May, Ally Bank said it would eliminate its $25 overdraft fee, giving customers six days to get in the black again before it potentially limits how they use their accounts. A number of other banks, like Bank of America and PNC, are taking smaller but still notable steps that include grace periods and small short-term loans — if users qualify.
Customers who have already opted into Capital One’s overdraft program will be automatically moved to the no-fee version early next year, fully eradicating the $35 fees it could charge up to four times a day. Eliminating the fees will cost the bank roughly $150 million in revenue annually.
Because Capital One is one of the nation’s larger banks, its decision takes on more significance, consumer advocates said.
Regulations introduced in 2010 helped curtail some of the worst abuses by requiring banks to receive consumers’ consent to opt in to overdraft services on debit transactions and ATM withdrawals, but they’re still worth billions of dollars a year in revenue across the industry.
Capital One customers who do not have overdraft protection will be able to enroll in the no-fee program, but habitual overdrafters may not qualify.