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Citi announced that it will be ditching overdraft fees later this year, making it the biggest bank to get rid of these charges. The bank exclusively told CNN on Feb. 24. it plans to get rid of overdraft fees, non-sufficient funds fees and overdraft protection fees by this summer.
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The company says that it’s committed to increasing financial inclusion in underserved communities.
Overdrafts occur when customers don’t have enough funds in their accounts to cover a transaction. Banks charge a fee to cover the cost. As GOBankingRates previously reported, the average overdraft fee is about $34 but vary by bank or credit union.
Citi is the only top-five bank to eliminate these fees, however, more lenders are lowering or eliminating overdraft fees due to growing competition and pressure from lawmakers. The Consumer Financial Protection is planning a “range of regulatory interventions” for institutions that on overdraft fees as a revenue source, CNBC reported.
“It’s great news because it helps consumers stay in the banking system and avoids them from being charged penalty fees at a time when they can least afford it,” Alex Horowitz, principal officer at The Pew Trusts, told CNN. “And it gives them time to recover from a financial difficulty and get back on their feet. It can help keep households solvent.”
Citi will continue to provide overdraft protection, including the ability to transfer funds from a linked savings account and an automatic personal line of credit. Fees for these services will also be removed.
Citi generated $70 million of overdraft and non-sufficient funds revenue through the first nine months of last year, according to the Consumer Financial Protection Bureau. However, CNN noted that the bank does not heavily rely on these fees as much as other big banks.
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“We’re tremendously proud to eliminate these fees altogether,” Gonzalo Luchetti, CEO of US Personal Banking at Citi, said to CNN in a statement. “These changes empower our customers to build long-term financial wellness with access to more affordable banking services.”
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