Citi Becomes Latest Bank to Drop Overdraft Fees
One of the most oft-cited complaints about major banks can be boiled down to two words: overdraft fees. Famously, these penalities of $35 or more would be applied to consumers who overdrew their checking accounts by even $1 or less. Furthermore, regulators and customers have accused some banks of deliberately re-ordering transactions in order to maximize the number of fees imposed. However, in recent years, some banks have begun to adopt more consumer-friendly policies to help ease the pain of overdrafts. Now, Citi is the latest big bank to announce it too is doing away with these penalties.
According to their press release touting the change, Citi is the only one of the top five U.S. banks to completely eliminate overdraft fees and says that its overdraft collections had previously amounted to less than its competitors. Additionally, by summer of this year, the institution will discontinue returned item fees and overdraft protection fees. Citi noted that these changes are in line their its ongoing efforts to expand access to inclusive banking products and services.
While the fees for various overdraft protection products will be removed, Citi will still offer various products to help customers prevent overdrafts or declined transactions. These include Safety Check — a feature that transfers funds from a linked savings account to cover checking overdrafts — and Checking Plus, a line of credit that is automatically tapped to cover overdrafts. Elsewhere, customers can enroll in Low Balance Alerts in order to stay on top of their available funds.
Citi’s announcement comes as several banks and institutions have begun making major adjustments to their fee schedules. The trend first started with online banks such as Discover in 2019 and Ally in 2021. More recently, Chase and Wells Fargo both revealed plans to update their policies in a bid to help customers avoid overdraft fees and other penalties. However, some of these changes won’t be fully implemented until later this year.
Commenting on the policy changes, Citi’s CEO of U.S. Personal Banking Gonzalo Luchetti said, “This latest enhancement is a significant step for Citi as a leader in the banking industry offering the most consumer-friendly overdraft practices. We are continuously looking for ways to utilize our industry-leading capabilities to make the financial system easier and more equitable for communities who have little or no financial buffer.”
There’s no doubt that the removal of overdraft fees is a good thing for consumers. At the same time, it’s also easy to imagine customers growing frustrated by declined transactions that could also put them in a bind. Thus, it’s also nice to see that Citi will be keeping some of its protection programs in place while removing the associated fees. Hopefully these tools will help consumers avoid overdrafting their accounts, while continuing to enable them to make necessary purchases.