A question for you, what costs your bank only $1, but sets you back $35? If you guessed an overdraft, you are correct. It doesn’t have to be that way any longer. Rob talks about one bank ditching the fee on this MoneyWise.
A question for you, what costs your bank only $1, but sets you back $35? If you guessed an overdraft, you are correct. But it doesn’t have to be that way any longer. It’s no secret that banks have been gouging customers with overdraft charges for decades. Could that be coming to an end?
You never want to have an overdraft on your checking account. But anyone can make a mistake. For example, maybe a deposit you expected didn’t come through. You forget to check on it, some auto payments go out, and there you are, overdrawn.
But then you’re hit with an overdraft fee, which these days averages around $35. This is a huge moneymaker for banks, because it only costs a bank about $1 to process an overdraft.
Ally, one of the largest online banks, has announced it will no longer charge overdraft fees to any of its customers. Ally had waived those fees temporarily last year due to COVID, but they’ve now made the change permanent.
In a press release, Ally CEO Jeffrey Brown said, "80% of overdraft fees are paid by consumers living paycheck to paycheck or with consistently low balances – precisely the people who need help stabilizing their finances.”
Brown went on to say that eliminating those fees will help keep people from falling further behind and feeling penalized.
Other banks have claimed they stopped charging overdraft fees, but in reality they only stopped allowing overdrafts.
So, Ally announcing it will no longer charge customers for overdrafts is significant for the banking industry, and it’s leading to speculation that the rest of the industry may have to follow suit.
Here are a couple of questions we answered from our callers on this program:
I got married recently and my wife owes on a car loan. She is still paying on a car that she returned. How is this possible?
What is the best way to pay my house off fast?
I have company stock in the company I have been with for 15 years. I am about to switch companies. Should I leave the stock where it is or move it somewhere?
I went to get a car loan and my credit score was around 811. When I paid off the loan my score was around 780. Why did paying off the car lower my score?
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