Capital One is giving up over $150 million in annual revenue by their recent move to get rid of overdraft fees.

Banks bring in billions each year in overdraft fees and these hit low income populations the hardest because they are the ones most likely to suffer from those fees. It has been a controversial practice for years and this is a huge move by a prominent financial institution to change those ways and get rid of the overdraft fees that have come under such criticism over the years.

This means a meaningful dip in revenue for those banks that do make the move to get rid of overdraft fees. If many more did the same altogether that would be tens of billions that they were no longer bringing in from those overdraft fees.

Banks charged over $12 Billion in overdraft fees in 2020

These bank fees traditionally are known to hit low income households the hardest. Black and Hispanic households have especially been hard hit by these fees, they paid over $3 billion collectively last year.

Overdraft has become a form of short term credit for millions but those fees have been criticized as being predatory and it is shocking to see a major institution like Capital One make this change to get rid of those overdraft fees.

The plan to get rid of those overdraft fees is reportedly supposed to kick in next year. Already, we see that other banks have also looked at doing the same and made similar moves, so who might be next? For now, Capital One is the most prominent institution to have made this move.

The Consumer Financial Protection Bureau has also released a report this year about their recent investigation into bank overdraft fees, referring to them as abusive and suggesting that banks have become increasingly reliant on that revenue.

Almost half of those fees are being brought in by JPMorgan Chase, Bank of America, and Wells Fargo.

Sources:
https://www.cnbc.com/2020/12/01/banks-will-get-30b-in-overdraft-fees-this-year-heres-how-to-avoid-them-.html
https://www.forbes.com/advisor/personal-finance/how-to-prevent-overdraft-fees/
https://www.cbsnews.com/news/atm-fee-cfpb-fdic-checking-account-low-income-overdraft-fee/
https://www.wsj.com/articles/capital-one-is-latest-bank-to-ditch-overdraft-fees-11638393702
https://www.cnbc.com/2021/12/03/banks-like-capital-one-and-ally-are-eliminating-overdraft-fees.html
https://www.foxbusiness.com/personal-finance/capital-one-overdraft-fees-cfpb