Detroit-Based Ally Bank Drops Overdraft Fees
Detroit-based Ally Financial is eliminating overdraft fees. Ally is the first major US bank to do this. It raises some eyebrows. Many banks, to some extent, rely on problems for their customers to generate more money. The industry collected about $ 12 billion in overdraft fees last year. Ally Bank has used a different model for the associated fees than most banks. Current account fees were not a significant source of income for the bank.
Overdraft fees have long been a sore point for many people and an election issue for more and more politicians in recent years. Ally’s announcement mentions how overdraft fees will affect Black and Latin American customers. Some economists believe that this is one of the reasons many ethnic minority residents in America don’t use banks. An Ally executive admits that overdraft fees can scare potential customers, and eliminating the problem takes it off the table entirely.
Ally customers who do overdrafts don’t get away with it entirely. The bank states that it usually handles smaller transactions that could move an account into overdraft fee territory. Others that are larger quantities can simply be rejected. Ally grants its customers 6 days from the time an account is overdrawn to bring it back into positive territory.
An informational notice posted on Ally’s website states: “If you overdraw your account, the only difference is that we will not charge you a fee. We also offer a free (and completely optional) overdraft service. We’ll transfer funds from your linked account in increments of $ 100 if you have an overdraft. Remember, if you link a savings account for the overdraft service, those transfers will count towards the limit of 6 withdrawals per billing cycle, but we will continue to reimburse excessive transaction fees. “
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