The cost to overdraw a bank account could drop to as little as $3 under a proposal announced by the White House, the latest effort by the Biden administration to combat fees it says pose an unnecessary burden on American consumers, particularly those living paycheck to paycheck.
The change could potentially eliminate billions of dollars in fee revenue for the nation’s biggest banks, which were gearing up for a battle even before Wednesday’s announcement. Exactly how much revenue depends on which version of the new regulation is adopted.
Banks charge a customer an overdraft fee if their bank account balance falls below zero. Overdraft started as a courtesy offered to some customers when paper checks used to take days to clear, but proliferated thanks to the growing popularity of debit cards.
Exactly. What’s worse is that it’s almost justifiable if you consider how a bank makes money: float. If a huge swath of your account holders are maintaining as close to a $0 balance as possible, they’re costing you money to manage all the related overhead. I say “almost” because if they, oh I don’t know, made savings accounts attractive for small timers (say 4% interest on balances below $200), it might not require a collections department to gather forcibly extracted fictitious income.