Regions Bank announces new current account without overdraft
- Regions Bank has announced a new checking account that has no overdraft fees or insufficient funds.
- This offer is an indicator of the pressure banks are under to bow to anti-overdraft sentiment.
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The Birmingham, Alabama-based bank has announcement a new checking account, called “Regions Now Checking”, which has no overdraft fees or insufficient funds (NSF). The account comes with a monthly fee of $ 5 and can be linked to other regional bank accounts to provide free overdraft coverage to those accounts as well.
Regions Now Checking is the latest sign of a large backlash against overdraft fees:
- Legislative side, a new state law in New York, banks that maintain checking accounts must pay checks in order of receipt. It also gives depositors with bad checks due to insufficient funds the right to have smaller checks honored if a balance is large enough to cover them. Overdrafts have also been a major theme in recent Congressional hearings with CEOs of major banks, according to Banking Dive.
- On the market side, a growing number of banking players have deployed liquidity assistance systems that limit clients’ exposure to overdrafts. The two neobanks like Carillon and holders such as PNC and Fifth third offer these features. Other banks, like Ally– went even further and completely eliminated overdraft fees.
Regional supply is a particularly strong indicator of the pressure banks are under to bow to anti-overdraft sentiment. A June 2020 study of the top 20 banks by 2019 total overdrafts and NSF commission income found that these commissions accounted for 17.7% of non-interest income in regions, making it the fifth most dependent on these commissions according to this measure, according to Banking Dive. .
The regions strategy of offering an overdraft account with a monthly fee is a middle ground approach that helps cover foregone fee income while easing the minds of customers.
Regions’ new account resembles TD Bank’s strategy to provide customers with an overdraft account – TD Essential Banking Account costs $ 4.95 per month, does not allow most overdrafts, and does not charge any fees on those that occur.
It’s a balanced approach: while the fees associated with the account mean it hasn’t completely wiped out overdrafts without any caveats (as Ally did), it’s still easier to use. for customers than offers from other banks that try to minimize fees by giving customers
(like PNC’s Low-Cash mode).
Following this line allows regions to offer overdraft-conscious clients an obvious option while lessening the blow to their bottom line from reduced overdraft income.
Correction: Varo was originally mentioned as a neobank offering liquidity management tools. We have removed the reference. Unlike other financial services companies named in the article, Varo has never charged an overdraft fee.
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