Bank: overdraft fees come in for heavy criticism

Under fire from critics, several American banks have decided to lower the fees charged for bank overdrafts. In France, there is a ceiling on intervention fees in the event of a banking incident, but charges vary widely from one bank to another.

Biden administration asks banks to lower overdraft fees

At the end of 2021, several banks in the United States decided to reduce overdraft fees, including JP Morgan, Wells Fargo and Bank of America. Capital One has chosen to go one step further, eliminating overdraft fees altogether.

JP Morgan, whose net income in 2021 was up 66% on 2020 to $48.3 billion, has introduced new measures to reduce overdraft costs.

Bank of America has recently announced its intention to reduce by more than a factor of 3 the fees charged in the event of a banking incident, when a transaction is carried out on an account with insufficient funds. Up to now, these charges have been $35 per transaction, a rate that will be reduced to $10 from May onwards.

Wells Fargo Bank now allows customers to fund their accounts within 24 hours of a rejected transaction, to avoid fees. The fees that used to apply to funds transfers between accounts have also been abolished.

This common impetus is due to the Biden administration's desire to limit these fees, which are concentrated on a small proportion of households. Only 9% of accounts are sufficient to generate 80% of bank revenues from overdraft fees. The latter have steadily increased over the years: they brought in $12 billion in 2015 for US banks with more than $1 billion in assets, and $15.5 billion in 2019.

JP Morgan, Wells Fargo and Bank of America alone accounted for 44% of overdraft fees. The Consumer Financial Protection Bureau (CFPB) has decided to step up its controls, reserving the right to take additional measures.

Overdraft fees: revenues difficult for French banks to estimate

In France, the subject is just as thorny. According to a study by comparator Panorabanques, 46% of French people were overdrawn at least once in 2021. 19% did so at least once a month, and 13% once a quarter.

Although commissions charged for banking incidents have been capped since 2014, they can still reach 8 euros for each transaction on an insufficiently funded account, up to a limit of 80 euros per month.

In addition, you may have to pay for the bank to send you an information letter, which costs an average of 9.70 euros, as well as the agios. The latter vary from bank to bank: the average interest rate is between 16% and 21%. This rate is applied to the amount of the overdraft.

Unlike in the United States, the exact amount of overdraft fees collected by French banks is difficult to ascertain. However, it is possible to get an idea based on the figures communicated by consumer associations: according to them, banking incident fees bring in 6.7 billion euros each year for the various establishments.

According to Panorabanques figures, overdraft fees have not increased in 2021. However, there are significant variations between banks. Customers of online banks are better off than those of traditional banks. While the former paid an average of just 4 euros in overdraft fees in 2021, the latter paid 66 euros.

For customers of all banks who do not have an authorized overdraft, finding themselves with an underfunded account can cost an average of 235 euros a year.