Ally Bank eliminates overdraft fees for all customers effective immediately

CHARLOTTE — Ally Bank has eliminated all overdraft fees for all its accounts beginning Wednesday, officials said in a statement.

Americans paid $12.4 billion in overdraft fees in 2020, according to the 2021 FinHealth Spend Report. The bank said it hopes removing overdraft fees with help protect people who are disproportionately hurt by overdrafts.

“This is a significant advancement for consumers as we live out our mission and live up to our name -- being a true ally,” Ally Financial CEO Jeffrey Brown said. “Overdraft fees are a pain point for many consumers but are particularly onerous for some. It is time to end them.”

95% 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 households with checking accounts, 43% averaged 9.6 overdrafts during 2020, resulting in annual overdraft fees of hundreds of dollars per household on average.

The bank cited statistics from the report as motivation for the change in policy.

“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,” Brown said. “Eliminating these fees helps keep people from falling further behind and feeling penalized as they catch up.”

Ally Bank’s announcement comes on the heels of PNC Bank launching new options for its customers to avoid overdraft fees nationwide. An early trial resulted in a 60% reduction in overdraft fees, according PNC’s regional president for western Carolina. For more on PNC’s overdraft protections, click here.

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