Blacks pay nearly triple in higher bank fees than white customers. Now there might be some relief in sight.
Some banks have decided to do away with overdraft fees.
Black bank customers reported facing higher monthly fees than white customers typically do, a nationwide survey found. Whites reported paying $5 a month in bank fees, including overdraft penalties and ATM surcharges. Blacks, however, reported paying $12 a month, according to personal finance firm Bankrate. In addition to this, almost 80 percent of white bank customers said they had no fees, compared with 60 percent of Blacks.
“We see this pretty plainly as a racial-justice issue,” Peter Smith, a senior researcher at the Center for Responsible Lending, told Business Insider, adding: It’s “just another layer of what is happening in so many ways.”
The average overdraft fee in 2020 was $33.47, found a Bankrate study. And the fee is the highest it’s ever been in the 23-year history of Bankrate’s annual survey.
Now some banks are finally taking heed to longstanding complaints from consumer advocates about unfair bank fees.
Capital One will be getting rid of all consumer overdraft fees, and in the process it will lose $150 million in annual revenue. It’s the largest U.S. bank yet to end the industry practice of charging customers the fee.
“We will completely eliminate overdraft and non-suﬃcient funds (NSF) fees for all Capital One consumer bank customers,” CEO Rich Fairbank told the bank’s employees in a memo, calling it a “first for major banks in the U.S.”
Some other banks have eliminated the fees, such as online-only bank Ally Bank.
There has been pressure for banks to stop charging the excessive fees from which banks pull in millions. In 2019, major banks collected more than $11 billion in overdraft fees, CNBC reported.
“People who have less in the way of financial means are more likely to have overdraft fees,” Mark Hamrick, senior economic analyst at Bankrate, told CBS News.
Sen. Elizabeth Warren has hammered the banking industry, especially JPMorgan Chase over the fees.
JPMorgan has not agreeed to stop charging the fees, but a JPMorgan spokeswoman told CNBC the bank ended non-sufficient funds fees and increased the amount customers can overdraft before a fee is charged. “These changes reflect our continuous efforts to offer the best, most competitive products and services our customers want,” the bank said.
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The nation’s top five largest banks — JPMorgan Chase, Bank of America, Wells Fargo, Citibank, and U.S. Bank — earned, on average, more than 10 percent of their consumer and business banking revenue from deposit-related fees (encompassing all service charges on an account) in 2020, according to Federal Deposit Insurance Corp. data and quarterly reports.