Another bank is raising fees.
U.S. Bank is bumping up overdraft fees for all its accounts beginning June 29, the Minneapolis-based bank confirmed on Wednesday. The bank's new $35 overdraft fee brings it in line with the country's biggest financial institutions, including Bank of America.
"This change is part of an overall review of our deposit fees which will include the elimination of other fees," said bank spokeswoman Teri Charest. The bank, which has more than 15 million customers nationwide, said it is eliminating the fee to close an account early and lowering fees for a stop payment. The bank charges a maximum of three overdrafts in one day.
Unlike Bank of America, for example, which charges the same fee if you go $1 or $100 over on your account, U.S. Bank's fees are on a sliding scale: For overdrafts of less than $10, U.S. Bank doesn't charge anything. That policy, implemented in 2010, won't change. However, it will cost $15 if you go $10-$15 over. Overdraft your account beyond $15 and you'll be slapped with a $35 fee.
Currently, the bank charges $10 on overdrafts of less than $20 and $33 for overdrafts of $20 or more.
Of course, there is an easy way to avoid overdraft fees. Don't enroll in optional overdraft protection. Regulations passed in 2010 forbid banks from automatically enrolling checking account customers in overdraft protection.
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U.S. Bank is not the only bank to bump up fees this year. In April, the cost to have a Citizens Bank's Green Checking account increased to $9.99 per month, up from $4.99. Earlier this year, Wells Fargo said it was eliminating free checking altogether.
All banks are trying to find ways to increase revenue, which has been curbed by recent financial regulations on how they can charge both overdraft fees. The biggest banks have also lost revenue from interchange fees on debit-card swipes.
But overdraft fees are still tricky terrain for banks. Consumer advocates have criticized overdraft fees as unfairly hurting the poorest of customers. These customers routinely do not have enough money in their accounts and banks unfairly target them for overdraft services, advocates say.
A Pew report from early May showed that 14 percent of bank customers overdraft an account between six and 10 times per year, adding up to hundreds of dollars in extra costs to some consumers.
But some customers like overdraft protection because it means a payment will still be cleared by the bank even if there is not enough money in the account. The overdraft fee is effectively the cost for a very short term loan from the bank.
The Consumer Financial Protection Bureau said earlier this year that it will look into the overdraft fee policies at nine major banks to determine if the current regulations for overdraft protection go far enough to protect consumers.
"Overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it," said Richard Cordray, the director of the CFPB, in prepared remarks earlier this year. "We want to learn how consumers are affected and how well they are able to anticipate and avoid paying penalty fees."
Before regulation was passed to make the overdraft protection optional, banks not only raked in billions in fees, they also rearranged transactions so that the biggest bills would be paid more quickly, causing accounts to drain quicker and leaving customers susceptible to multiple overdrafts on smaller purchases.