BofA Debuts Program to Move Further Away from Overdraft Fees
(Bloomberg) -- Bank of America Corp. is taking another step away from overdraft fees.
The lender, which is among the biggest collectors of such fees, debuted a new service that automatically moves customers’ money to avoid overdrafts. The program, Balance Connect, allows consumers to link their checking account with as many as five other Bank of America accounts and transfers available funds when needed for a $12 fee -- lower than existing overdraft charges.
It’s the latest step that Bank of America has taken to help clients avoid potential overdraft fees. The firm in 2014 unveiled SafeBalance Banking, an account that doesn’t charge any overdraft fees. The number of such accounts has soared 40% in the past year, surpassing 3 million, the company said.
“We want to give clients the solutions to be able to avoid these kinds of fees wherever, whenever possible,” Steve Boland, Bank of America’s president of retail, said in a telephone interview.
Consumers with overdraft protection are often charged around $35 anytime they spend more than they have in their account -- a service that generates almost $20 billion a year for U.S. banks. Such fees have become an increasingly hot-button issue for banks, sparking ire from consumers, regulators and lawmakers alike.
That’s because frequent users of overdraft protection -- or consumers who use the service one or more times in a month -- now account for more than half the profitability of mass-market checking accounts, according to the consultancy Oliver Wyman Inc. That means lower-income consumers often subsidize the free checking accounts used by their wealthier counterparts.
Lenders have been slowly moving away from the charges. Bank of America, for its part, collected $509 million in overdraft fees in the first six months of 2021, an 8.6% decline from a year earlier, according to regulatory filings.
The Charlotte, North Carolina-based company also said its short-term loan program, Balance Assist, will soon surpass 100,000 loans. Bank of America allows customers who have checking accounts for more than a year to apply to borrow as much as $500 for a $5 flat fee. The service rolled out in certain states in December and became more widely available across the U.S. in March.
“Everybody has different financial needs,” Erin McCullen, the bank’s head of consumer deposit products, said in an interview. “We want to provide those folks with the right solutions at the right time so they can manage their finances.”
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