Santander customers will have to overdraw by $100 to incur fee

Santander Bank is the latest depository to make it easier for customers to avoid overdraft fees.

The $89.5 billion-asset unit of Spain’s Banco Santander has raised the threshold above which consumers and small businesses will incur an overdraft fee from $5 to $100. In other words, customers will not pay a fee until they have a negative account balance of more than $100.

Roughly 90% of Santander’s consumers will never be charged an overdraft fee under the new policy, which is dubbed Santander Safety Net, estimated Pierre Habis, Santander’s head of consumer and business banking.

"What we learned is that $100 is the easiest number for people to remember," said Pierre Habis, Santander’s head of consumer and business banking, in connection with the bank's decision to allow customers to overdraw their accounts by up to $100 before incurring a fee.

“We had a couple of things we wanted to make sure of: one is clarity and ease of understanding from a consumer perspective. What we learned is that $100 is the easiest number for people to remember. That was the guiding principle,” Habis said in an interview.

Santander joins a growing number of banks that have made moves this year to either eliminate or substantially reduce the overdraft fees they collect. Ally Financial said in June that it would stop charging overdraft fees altogether, while others, including PNC Financial Services Group in Pittsburgh and Fifth Third Bancorp in Cincinnati, revised their policies to make the fees easier to avoid.

The industry has faced recent competitive and regulatory pressure on overdraft fees. Some fintech startups, such as Chime and Varo, market themselves as more consumer-friendly than traditional banks because they don’t charge overdraft fees. At the same time, Biden administration officials at the Consumer Financial Protection Bureau are expected to take a tougher stance on overdraft fees.

Revenue from overdraft fees plunged across the banking industry last year, partly because many banks waived the charges early in the pandemic and partly because government stimulus payments boosted consumers’ account balances. Recently, some bank executives have cautioned investors that they do not expect that revenue to return to pre-pandemic levels.

In addition to raising the overdraft threshold, Santander said Monday that it will cut the number of overdraft fees that customers can incur in a single day. The bank will limit overdraft paid and overdraft returned fees each to three per day, down from a previous limit of six. The policy will not apply to Santander’s sustained overdraft fee, which a customer incurs when their account has been overdrawn for five consecutive business days.

In the short term, Santander expects its overdraft fee income to drop by at least 40%, Habis said. But the Boston-based bank expects to make up that lost fee income eventually by selling more products and services to its consumer and small business customers, he said. In particular, Habis highlighted new private banking services that Santander introduced earlier this year.

“From a fee income perspective, we’re seeing a lot more engagement with our managed money and investment on the consumer side,” he said.

Update
This story has been updated to clarify that Santander will only charge fees to customers whose accounts are overdrawn by more than $100, as opposed to those whose accounts are overdrawn by $100 or more. The story has also been updated to clarify that the new policy of charging a maximum of three overdraft fees per day only applies to overdraft paid and overdraft return fees.
November 09, 2021 11:18 AM EST
For reprint and licensing requests for this article, click here.
Consumer banking Regulation and compliance
MORE FROM AMERICAN BANKER