Overdraft Fee Income Rises at Major U.S. Banks Amid Regulatory and Economic Shifts
Overdraft fee income increased at several large U.S. banks during the first nine months of the year, reflecting a combination of regulatory changes and evolving economic conditions. According to an analysis of regulatory filings by major U.S. retail banks, 14 out of the largest 20 banks reported higher revenues from overdraft and non-sufficient funds (NSF) fees, while two banks recorded notable declines.
Overall, overdraft and NSF fee income for the group rose 2% year-on-year to $2.99 billion. The majority of this revenue was driven by overdraft fees, as most large banks have largely eliminated NSF charges in recent years.
Regulatory Context
The increase in fee income followed a significant regulatory shift in May, when U.S. lawmakers repealed a proposed Consumer Financial Protection Bureau (CFPB) rule that would have capped overdraft fees at $5. The regulation, originally scheduled to take effect in October, was part of broader efforts to limit so-called “junk fees” and was estimated to have saved consumers billions of dollars annually.
With the rule rescinded, banks were no longer required to prepare for fee caps, contributing to divergent approaches across the industry. Some institutions maintained more consumer-friendly policies, while others reverted to existing fee structures.
Bank-Level Performance
Among the banks analyzed:
- USAA Federal Savings Bank reported the largest increase in overdraft fee income, rising 20% year-on-year, with fees accounting for a significant share of net income.
- Citizens Bank recorded a 17% increase, while TD Bank’s U.S. operations saw fee income rise 14%.
- JPMorgan Chase and Bank of America posted more moderate increases of 8% and 2%, respectively.
These gains were partially offset by declines at Wells Fargo, where fee income fell 10%, and Truist Financial, which reported a sharper 22% drop. Several large institutions, including Citigroup and Ally Financial, have eliminated overdraft fees entirely in recent years while continuing to offer overdraft services.
Economic Factors
Economic pressures also played a role, as periods of tighter household finances tend to increase the likelihood of accounts becoming overdrawn. Historical data indicates that overdraft fees are disproportionately incurred by a small segment of customers, often those maintaining low account balances.
Longer-Term Trend
Despite the recent uptick, overdraft fee revenues remain well below historical levels. Industry-wide fee income totaled approximately $6 billion in 2023, compared with $13 billion in 2019, highlighting a structural decline driven by regulatory scrutiny and changes in bank practices.
The latest data underscores a widening divergence in how U.S. banks approach overdraft fees following regulatory easing. While some institutions continue to reduce reliance on such charges, others are seeing modest revenue rebounds amid economic strain and a more permissive regulatory environment. Nonetheless, overdraft fees no longer represent the level of income they once did for the U.S. banking sector.
