Banks’ overdraft/NSF fee revenue declines significantly compared to pre-pandemic levels

Table 1: Change in overdraft/NSF fee revenue through the third quarter of 2022 versus pre-pandemic 2019 baseline and 2021 for select individual banks and groups of banks

Overdraft/NSF Revenue

Select Individual Financial Institutions

Financial Institutions grouped according to 2021 OD/NSF fee revenue

Individual Financial Institutions and Grouped Financial Institutions

The eight individual banks listed in Table 1 all report declines in their overdraft/NSF fee revenue across the first three quarters of 2022 relative to the same period in 2019. Specifically:

• Bank of America experienced the most significant decline (69.3%), which may reflect the reduction of its overdraft fee to $10 and the elimination of NSF fees, among other changes.
• PNC (55.0%) and U.S. Bank (41.4%) also experienced declines above 40% as compared to 2019. PNC has implemented a limit of one overdraft fee per day and eliminated NSF fees, among other changes. U.S. Bank has implemented a $50 negative balance cushion and a grace period until the end of the next day before an overdraft fee is charged, as well as eliminated NSF fees.
• JPMC and Truist experienced declines of 37.3% and 36.5%, respectively. JMPC has implemented a $50 cushion and grace period until the end of the next day. Both banks have eliminated NSF fees.
• Wells Fargo (17.2%), TD Bank (19.4%), and Regions Bank (19.6%) experienced relatively smaller declines.

All the small/midsize bank groups also report reduced overdraft/NSF revenues through the first three quarters of 2022 compared to those of 2019. Banks that reported between $50 and $200 million in overdraft/NSF fee revenue during 2021 reported the most significant decrease (31.0%). In contrast, those reporting between $2 million and $10 million reported the least significant decrease (4.4%).

One midsize bank within the $50 million to $200 million group, Capital One, experienced a drop in overdraft/NSF fee revenue of 98.1%, which is larger than any of the select individual banks, during the first three quarters of 2022 compared to the same period in 2019. Capital One eliminated all overdraft and NSF fees in early 2022.

Other Listed (Maintenance and ATM) Fee Revenue

Call reports require banks to list consumer deposit account revenue from three sources: 1) combined overdraft and NSF fees, 2) periodic maintenance fees, and 3) ATM fees. We refer to these three types of fees as “listed fees.” In Table 2 (structured similarly to Table 1), we report changes in listed fees other than overdraft/NSF fees, i.e., maintenance and ATM fees, to examine whether certain fees may have been increased to replace reduced overdraft/NSF fee revenue.

We did not identify a clear correlation between declines in overdraft/NSF fee revenue and increases in other fee revenue.

Table 2: Change in other listed (maintenance and ATM) fee revenue through the third quarter of 2022 versus pre-pandemic 2019 baseline and 2021 for select individual banks and groups of banks

Other Listed (Maintenance and ATM) Fee Revenue

Select Individual Financial Institutions

Financial Institutions grouped according to 2021 Overdraft/NSF fee revenue

Individual Financial Institutions and Grouped Financial Institutions

Among the eight larger individual banks, compared to the pre-pandemic 2019 baseline, there was a divergence of experiences in other listed fee revenue. However, there is no clear correlation between decreases in overdraft/NSF and increases in other listed fee revenue. Of the three banks with the most significant declines in overdraft/NSF fee revenue since 2019, Bank of America’s other listed fee revenue dropped 7.9%, while PNC’s increased 26.4% and U.S. Bank’s decreased 1.5%. In terms of dollar amounts, the declines in overdraft/NSF fee revenue across all eight banks for the first nine months of 2022 ($2.2 billion) far exceeded the net increase in listed fee revenue ($61 million). Banks with $10 million to $50 million and banks with $50 million to $200 million in 2021 overdraft/NSF revenue on average reported less revenue from other listed fees than before the pandemic; in contrast, banks with $2 million to $10 million in 2021 overdraft/NSF revenue saw increases averaging 12.1%. Across all reporting banks, other listed fee revenue decreased by $11 million from 2019 to 2022, even as overdraft/NSF fee revenue decreased by $2.8 billion.

We will continue to track overdraft/NSF fees, and we are considering rulemaking activities related to these fees. We will also continue to follow other listed account fees to discern to what extent these fees might create barriers to account access.

For our latest review of overdraft/NSF policies, please see the most recent table tracking overdraft fees and policies across banks, as well as the most recent chart on NSF fee practices.

For further discussion of trends in these practices, see our February 2022 analysis, April 2022 analysis, and July 2022 analysis.

Footnotes

1. The data construction is the same as in our Dec 2021 report; please see that report for details. For the sample, we restrict attention to banks that reported listed fees during the first three quarters of 2022.
2. We define two groups of small banks, those collecting under $2 million and those collecting $2 million to $10 million in overdraft/NSF fee revenue, and two groups of midsized banks, those collecting $10 million to $50 million and those collecting $50 million to $200 million in overdraft/NSF fee revenue in 2021.
3. Since our focus is exclusively on fee revenues, we use this categorization as opposed to the more common categorization by asset size. This is because overdraft/NSF revenues and asset size are strongly but not perfectly correlated. This means that some banks that are categorized as midsize banks here based on their overdraft/NSF revenues may not be midsize based on their assets. Conversely, some banks that are categorized as small banks here based on their overdraft/NSF revenues may not be small based on their assets.