Sick of overdraft fees?
PNC Bank has a unique answer
PNC Bank is launching a unique service to help customers avoid overdraft fees — fees that have become so onerous for some households that it has driven them to stop using banks altogether.
“Overdraft as a product has probably been the No. 1 aggravation point for our customers,” CEO Bill Demchak said during a virtual news conference Tuesday.
The product — called “Low Cash Mode” — will be rolled out nationwide in June and July to PNC’s electronic “Virtual Wallet” customers using the Pittsburghbased bank’s mobile banking app.
A pilot program with nearly 20,000 customers showed they were able to cut overdraft fees by an average of 60%, PNC said.
Overall, studies estimate overdraft charges — which average about $34 a pop — cost consumers some $17 billion per year. Roughly a decade ago, big banks, including PNC, paid millions of dollars to settle class action lawsuits alleging they reordered checks and debit card transactions to process them in a way that triggered the most overdraft fees. At the same time, PNC stopped processing transactions from high-to-low and started processing them in the order they came in.
With PNC’s new product, “We’re able to shift away from the industry’s widely used overdraft approach, which we believe is unsustainable,” Mr. Demchak said.
Demchak said.
Built on patent-pending technology, Low Cash Mode alerts customers when their balances are low via email, text or push notices. If the balance is negative, it gives them options for avoiding an overdraft fee by putting more money into the account, or reversing payments that triggered the overdraft.
“You will see what caused the negative balance,” Mr. Demchak said. “You will say, ‘I need to make the auto payment, but I don’t need to make the one to my gym, so I can return that payment.”
PNC won’t charge an insufficient funds fee or overdraft fee for payments that are reversed. However, reversing a payment could trigger a late fee charged by the lender or other party that is owed the money.
Customers will be alerted to how long they have to resolve the overdraft, which typically will be from 30 to 40 hours, the bank said.
PNC also said it would limit overdraft fees to one per day, down from four.
“You hear about no-overdraft [programs], but that is because everything gets bounced,” Mr. Demchak said. “We basically say you can return it if you want, or you can fund it a different way, which is completely unique. We are putting that choice in the hands of customers.”
Low Cash Mode is expected to help PNC customers avoid $125 million to $150 million in overdraft fees annually. The bank said it already accounted for the loss in its revenue outlook for 2021.
Roughly 50% of PNC’s consumer customers have Virtual Wallet accounts. The bank expects to offer a similar overdraft prevention service at some point for business customers.
“We firmly believe that this innovative and differentiated approach will drive significant growth in new and existing customer relationships over time,” Mr. Demchak said.
“We think [Low Cash Mode] will make a big difference in our customers’ lives. It will get rid of this headache that keeps our customer service reps busy.”