PNC nixes fees for nonsufficient funds

PNC Financial Services Group is joining the growing list of banks that are no longer charging fees to customers who don't have enough money in their accounts to cover transactions.

The Pittsburgh-based company announced Thursday that it has dropped nonsufficient-funds fees on all consumer deposit accounts. Previously, it had only eliminated NSF fees for consumers using the bank's online "virtual wallet" tool to manage checking and other accounts.

NSF fees, which can be levied when a check bounces or when a debit card purchase is declined, are different from overdraft fees, which are charged when banks approve purchases for customers whose accounts don't have enough money to cover such purchases.

The change, which took effect on Aug. 6, is PNC's latest move to reduce its overdraft-related fee income. It does not signal, however, an upcoming change of heart about overdraft charges.

When asked if PNC will eliminate overdraft fees, a spokesperson said Friday that PNC "believe[s] that giving customers choice, including the ability to overdraft if needed, can help them avoid bigger repercussions" such as credit impairments and loss of banking services.

Andrew Harrer/Bloomberg

For more than a year now, U.S. banks — especially large and regional companies — have been making changes to their overdraft-related policies, a result of Biden-era regulatory pressure and ongoing competition from lower-cost online competitors that don't charge customers such fees.

In the past 12 months, companies such as Detroit-based Ally Financial, Capital One Financial in McLean, Virginia, and New York City's Citigroup have dropped overdraft charges altogether. Like PNC, Bank of America in Charlotte, North Carolina, and M&T Bank in Buffalo, New York, stopped charging NSF fees, and both have also slashed their overdraft fees to $10 and $15, respectively.

In June, both Citizens Financial Group in Providence, Rhode Island, and Cullen/Frost Bankers in San Antonio, Texas, said they would stop charging NSF fees.

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There are mixed feelings about whether banks should end the practice of charging overdrafts fees. The Consumer Bankers Association, which represents retail banks, has argued that consumers need "emergency safety net products" such as overdrafts. 

In a recent American Banker op-ed urging lawmakers to reject the Overdraft Protection Act, CBA President Lindsey Johnson wrote that "overdraft remains one of the few short-term liquidity products available to consumers."

Critics, meanwhile, say overdrafts are too expensive and push some consumers out of the traditional banking and toward payday lenders and other costly short-term loan alternatives.

In an op-ed that ran one day after Johnson's, Rep. Carolyn Maloney, D-N.Y., wrote that "the fundamental case for this product is predatory — it's a fee for not having any money."

The proposed Overdraft Protection Act, a bill Maloney sponsors, would require customers to opt in to overdraft programs and limit the number of times that banks could assess such charges. 

PNC was one of the first banks to make a big change related to overdraft fees. In April 2021, it introduced a digital service called Low Cash Mode that warns consumers about upcoming payments that will drive their account balance below zero, and gives them 24 hours to prioritize payments, block transactions and add funds to the account before fees are assessed. 

Since Low Cash Mode's launch, nearly 64% of customers facing a negative-balance situation have been able to tweak their accounts to avoid overdraft fees, the PNC spokesperson said. Moreover, the service has reduced overdraft fees by 44%, or $76 million, the spokesperson said.

The dollars saved, and the revenues lost by banks, are climbing quickly across the industry. According to a recent analysis by The Pew Charitable Trusts, customers of large and regional banks are on track to save more than $4 billion a year as a result of recent overdraft reforms.

PNC on Friday declined to say much revenue it expects to lose by no longer charging NSF fees. 

PNC has previously indicated that its overdraft-related revenues could fall 50% or more per year. The company collected $114.3 million in such revenue between Jan. 1 and June 30, according to its latest call report. For all of 2021, it collected $268.8 million, a separate call report shows.

PNC's NSF fee had been $36 per item, the spokesperson said.