Citi has become the latest bank, and the first major U.S. bank, to announce it is eliminating overdraft fees. It's billing itself as the only "top five U.S. bank" to eliminate the fees and comes as banks have been criticized for making such fees part of their profit strategy.
Overdraft fees, returned item fees and overdraft protection fees will be nixed by this summer, Citi said in a statement Thursday.
“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," Gonzalo Luchetti, Citi's CEO of US Personal Banking, was quoted in the statement.
According to a Federal Reserve statistical release from December, the top five U.S. banks in terms of consolidated assets were JPMorgan Chase, Bank of America, Wells Fargo, Citibank and U.S. Bank.
The Consumer Financial Protection Bureau announced in December that in 2019 alone, the banking industry made $15.47 billion just in overdraft and non-sufficient funds fees.
Bank of America, JPMorgan Chase and Wells Fargo made up 44% of the 2019 fee revenue, CFPB said then.
“Rather than competing on quality service and attractive interest rates, many banks have become hooked on overdraft fees to feed their profit model,” CFPB Director Rohit Chopra said.
Some of those banks have made a few changes to curb the fees.
Starting in March, Wells Fargo will give customers a 24-hour grace period if they overcharge on their account. And customers who have direct deposit will be able to access their paychecks up to two days in advance.
Bank of America plans to cut the overdraft fees it charges customers from $35 to $10 starting in May. It will also stop charging fees for non-sufficient funds — which are levied when it rejects a transaction — better known as bouncing a check.
Chase announced in December that customers would not pay overdraft fees if their account is overdrawn by $50 or less at the end of the business day.
U.S. Bank announced in January that it will increase the amount an account can be overdrawn from $5 to $50 before an overdraft fee is assessed. Customers will have up to one full day to get that amount to under $50 before a fee kicks in.