Capital One drops overdraft fees for all customers

In a huge win for consumers, Capital One has decided to eliminate overdraft fees for all customers.

According to CNBC, Capital

One will forgo a projected $150 million in annual revenue by no longer charging fees of $25 to $35 for each overdraft.

“Now, when Capital One customers attempt transactions that dip beyond their balances, they will mostly use the bank’s free overdraft protection service, the bank said,” CNBC wrote. “Customers who paid the fees will be automatically rolled over into the service early next year. Those who opt out of the service will simply have overdrawn transactions declined at no fee.”

Capital One is thought to be the largest U.S. bank to do away with the common fees.

The Hustle, a business email newsletter, speculated that Capital One’s decision may signal a banking industry change. The newsletter compared the company’s decision to the 2019 move by discount brokers such as TD Ameritrade, Charles Schwab and Interactive Brokers to get rid of commissions on trades.

Earlier this year, money expert Clark Howard congratulated Ally Bank for making the same decision.

Charging overdraft fees, Howard said, “is to me an abusive thing. The banks look at it as a way to run away with your money at a time when you’re obviously already short of funds.”

“Banks live by ‘fee-ing’ you to death,” he added.

Howard has long preferred online banks or credit unions to traditional banks with physical locations. Some of his most important criteria: no maintenance, overdraft or ATM fees. No monthly balance requirement. And no direct deposit requirement.

If you’re in the market for a checking account, or you’d consider switching banks if you can find a better one, check out Team Clark’s story on the eight best free checking accounts.