Citigroup announced that it would be getting rid of its overdraft fees by this summer. The bank is the largest U.S. financial institution to eliminate overdraft changes, which have long been a subject of controversy in the country.
The bank said customers would no longer be charged fees such as non-sufficient funds fees, overdraft protection fees, and basic overdraft fees. The decision will make Citigroup the only bank among the top five U.S. retail banks to remove the fees. Based on assets, Citigroup is the fourth-largest bank in the country.
Citigroup said overdraft protection options will still be available, along with the ability to move cash from a connected Citigroup savings account and an automated personal line of credit. The bank said the options are there to assist customers in covering negative balance transactions. As part of the new reforms, the bank stated that fees for certain services would also be eliminated.
The CEO of U.S. Personal Banking at Citigroup, Gonzala Luchetti, said the bank was proud to have reached such as decision. Luchetti said the changes they will be implementing should empower its customers and help them reach financial wellness.
Citigroup has joined a growing number of lenders that are changing or eliminating overdraft fees in response to congressional criticism and increased competition from online rivals. Consumer groups have repeatedly argued that such fees are unfairly punishing the poor and financially vulnerable.
Consumer groups praised the decision. Alex Horowitz from The Pew Trusts said the decision is an "unequivocal win" for consumers. He added that by removing overdraft fees, more consumers could stay within the banking system while also getting the opportunity to recover from financial difficulty.
Unlike other banks, Citigroup does not rely as much on overdraft-related fees for income. That means that eliminating the fees will not result in a significant loss for the bank. Data from the Consumer Financial Protection Bureau, Citigroup made $70 million in overdraft and non-sufficient funds income in the first nine months of last year.
Capital One was the first major bank to commit to removing overdraft fees. The country's 10th largest bank by assets announced in December that it would eliminate all service fees for overdrafts and non-sufficient funds. Smaller banks such as Alliant and Ally have also eliminated overdraft fees.
Instead of removing the fees, other banks have chosen to reduce the cost of overdrafts. Last month, Bank of America announced that it would reduce the cost of bounced checks from $35 to $10. JPMorgan Chase previously announced that accounts overdrawn by $50 or less would not be charged overdraft fees.
