Ally Becomes Latest Bank to Discontinue Overdraft Fees
One of the most frustrating aspects of dealing with many banks is the dreaded overdraft fee. If customers accidentally spend more than is in their checking account, they may be assessed a charge of $30 or more. What’s worse, this fee is per transaction — with some institutions being accused of rearranging the order in which transactions post in a bid to maximize these fees. Now, at long last, another bank is doing away with overdraft fees altogether.
Earlier this week, Ally Financial announced that it was officially ending the collection of overdraft fees. This comes after Ally had already been automatically reimbursing such fees for customers due to the pandemic. The practice of reversing charges will continue for a bit longer but the company says that they will be removed entirely “in a few weeks.” Ally says that this update will affect 3.6 million checking, savings, and money market accounts.
In a press release detailing their decision, Ally cited statistics showing that overdraft fees not only negatively impact the financially vulnerable but also disproportionately affect minority communities. According to the 2021 FinHealth Spend Report, Americans paid a total of $12.4 billion in overdraft fees last year. Of this sum, 80% were paid by those living paycheck to paycheck. What’s more, 43% of financially vulnerable consumers with checking accounts incurred an average of 9.6 overdrafts in 2020, which translates to hundreds of dollars spent just on fees.
Commenting on the move to do away with overdraft fees, Ally Financial CEO Jeffrey Brown said in a statement, “This is a significant advancement for consumers as we live out our mission and live up to our name – being a true ally. Overdraft fees are a pain point for many consumers but are particularly onerous for some. It is time to end them.” Additionally, Ally Bank president of consumer and commercial banking Diane Morais explained, “We know that money can be a source of stress and confusion, and we try to simplify that for people. Overdraft fees can be a major cause of anxiety. It became clear to us that the best way to relieve that anxiety was to eliminate those fees.”
With this week’s announcement, Ally joins other sizable banks that have also discontinued overdraft fees — including Discover Bank, which moved away from fees in 2019. While this is great news overall, what remains a bit unclear is if customers will still be able to overdraft their accounts at all or whether transactions will simply be declined. However, on that front, the Associated Press reports that overdrafts may be approved at Ally’s discretion and that smaller transactions are more likely to go through. On that note, it will be interesting to see if any other institutions (including potentially brick and mortar ones) follow the lead of Ally and others in ending overdraft fees once and for all.