Overdrafts

Capital One and a few others are emulating upstarts like Chime and Varo, which let customers access their paychecks two days before payday. But loss of overdraft income and potential liability for errors dissuade many banks from changing their ways.

Ally and Huntington are the latest banks to take steps that will reduce revenue from customers who spend money they don’t have. The moves come at a time when technological, regulatory and social forces are converging to encourage change.

The online bank's decision to stop charging the fees is part of a broader reassessment across the industry. Ally had waived overdraft fees early in the pandemic and has historically been less reliant on them than many other institutions.

The heads of the six largest banks endured a second day of testimony as House members quizzed them on overdraft fees, investments in minority businesses and other issues. Meanwhile, the executives pushed back on Democrats’ proposal to raise the corporate tax rate.

The National Credit Union Administration changed course late last year and proposed changes that would in effect give members more time to resolve overdrafts. However, consumer activists and even some credit unions say the proposal falls short.

The feature has become popular during the coronavirus pandemic, providing a quick and simple way for credit unions to confirm users' identities as well as promote products and services.

The Cincinnati company's new Momentum checking and savings will give customers extra time to avoid overdraft fees, quicker access to paychecks and the option for advances on future direct deposits.

Some institutions for more than a year have reduced or eliminated overdraft and funds transfer fees to help members hard hit by the economic downturn, but it's unclear how much longer they can keep coasting on other sources of noninterest income.

The San Antonio company will no longer charge fees on transactions of $100 or less that take checking account balances into negative territory, as long as the customer has a $500 monthly direct deposit set up.

The company will give retail account holders 24 hours to cancel upcoming payments that would put them in the red. The move addresses customers’ top gripe and will have benefits that offset the lost income, executives say.