CHARLOTTE, N.C.—One of the largest online banks in the U.S. is no longer charging overdraft fees.
The $172-billion Ally Bank announced it has eliminated the fee, which is a significant piece of non-interest income at many financial institutions, including credit unions. At least one national analyst responded by to the development by saying every bank and CU in the country will be watching to see who else might follow.
Each of Ally’s more than 6.5-million customers is eligible, and there are no requirements or restrictions, the bank stated in a release.
"This is a significant advancement for consumers as we live out our mission and live up to our name - being a true ally. Overdraft fees are a pain point for many consumers but are particularly onerous for some. It is time to end them,” said Ally Financial CEO Jeffrey Brown. “Nationwide, more than 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. Eliminating these fees helps keep people from falling further behind and feeling penalized as they catch up.”
‘Financially Vulnerable’
Ninety-five percent of the consumers who paid $12.4 billion in overdraft fees in 2020 were "financially vulnerable" and disproportionately Black and Latinx, according to the 2021 FinHealth Spend Report. Among those financially vulnerable households with checking accounts, 43% averaged 9.6 overdrafts during 2020, resulting in annual overdraft fees of hundreds of dollars per household on average, Ally explained.
Ally Bank said the elimination of overdraft fees is the latest example of the bank’s "Do It Right" commitment.