WASHINGTON (Business Emerge/The States): Fourteen of the largest retail banking groups in the United States recorded higher income from overdraft and insufficient funds charges during the first nine months of the year, while a smaller number reported declines. Public regulatory filings show that fee income from these charges increased at most major institutions despite earlier reductions across the sector.
The figures cover 20 large retail banks operating nationwide that report overdraft and non sufficient funds charges to federal banking supervisors. These institutions together hold about half of all deposits in insured US banks. The reporting period spans the first nine months of the current year and includes banks with nationwide branch networks as well as institutions serving specific customer groups.
Combined income from overdraft and related charges for the group rose by about 2 percent to nearly $3 billion during the period. Most of the revenue came from overdraft charges, as many banks have reduced or eliminated separate non sufficient funds fees in recent years. The data also shows wide variation between individual banks, with some reporting double digit growth and others reporting notable declines.
Changes in the regulatory environment formed an important backdrop to the increase. A federal rule that would have limited overdraft fees to $5 per transaction was repealed earlier this year before taking effect. The measure had been scheduled to apply from October and was estimated by regulators to reduce annual costs for depositors by several billion dollars. Its removal meant banks were no longer required to adjust systems or pricing to comply with the cap.
Several large banks had already modified overdraft policies in previous years by lowering fees, increasing grace periods, or offering alerts to customers. Some institutions eliminated overdraft charges entirely. Others continued to rely on them as a source of income, particularly for customers with low account balances who incur repeated charges. Earlier regulatory research showed that a small share of accounts generated the majority of overdraft fees.
Among individual banks, USAA Federal Savings Bank reported the largest year on year increase, with fee income rising about 20 percent to $78 million over nine months. That amount represented more than one fifth of its net income for the period. Citizens Bank posted an increase of about 17 percent, while TD Bank reported a rise of roughly 14 percent. JPMorgan Chase and Bank of America recorded more modest gains of about 8 percent and 2 percent respectively.
Not all banks followed the same pattern. Wells Fargo reported a decline of about 10 percent in overdraft and related fee income, while Truist Financial recorded a drop of roughly 22 percent. Citigroup and Ally Financial had already ended overdraft fees in earlier years and continued to operate without charging them, while still offering overdraft services through other arrangements.
Despite the recent increase, industry wide overdraft fee income remains far below levels seen earlier in the decade. Total overdraft and related fees across the US banking system were about $6 billion last year, compared with roughly $13 billion in 2019. The latest data suggests that while some banks are again generating more revenue from these charges, overall reliance on overdraft fees has not returned to past levels.
