Capital One kills overdraft fees, citing need for consumer ‘safety net’

Capital One announced that it’s removing overdraft fees, and the $150M in annual revenue that goes along with it. The bank is also getting rid of non-sufficient fund (NSF) fees.

Why should we care?
Capital One is following a trend large banks and fintechs are jumping on, which is to eliminate overdraft fees as a measure to promote the financial health of their consumers. The movement away from overdraft fees was spearheaded by digital banking fintechs, including Chime, Varo, and Dave, and large banking institutions have eliminated them over the past year, including Ally Financial. Meanwhile, PNC Bank and Bank of America introduced features that are aimed at reducing consumers’ likelihood of using overdraft fees. Overdraft fees have taken heat from politicians and consumer advocates – including Sen. Elizabeth Warren – who suggest they’re predatory. The flipside is banks stand to lose a significant chunk of revenue from removing overdraft fees: One estimate suggested banks reaped $14B from overdraft fees in 2019. Nonetheless, Capital One said overdraft protection is an important safety net for consumers. “Capital One's complete elimination of overdraft and NSF fees is a landmark moment for American families,” Lauren Saunders, associate director of the National Consumer Law Center said in a statement. "This move by Capital One will have tremendous benefits for the most vulnerable consumers. It's critical we keep working to make the banking system more inclusive and fair for all."