Bank of America (BofA) is taking another step away from overdraft fees, as it launches a new service named Balance Connect.
BofA, considered as one of the largest collectors of such fees is making services easy to attract more customers. The new service automatically moves customers’ money from one account to another to avoid overdraft.
Customers can link checking account with five other BofA accounts
Balance Connect allows customers to connect their checking accounts with up to five BofA accounts. If Balance Connect customers attempt to overdraw their checking account, the service will automatically shepherd funds across accounts for a $12 fee.
Ordinarily, when a transaction is processed that exceeds a customer's available funds. BofA charges a $35 overdraft fee and this is a price point that is shared by many of the country's large banks. This overdraft service generates almost $20 billion per year for US banks and such fees have become an issue for banks as customers don’t want to pay such huge amounts of fees.
A survey published by Morning Consult found out that 52% of U.S. adults believe that overdraft fees are "an unfair penalty that disproportionately affects underprivileged customers".
However, lenders are slowly moving away from these charges. BofA, for its part, collected $509 million in overdraft fees in the first six months of 2021, an 8.6% decline from a year ago.
Erin McCullen, head of consumer deposit products at BofA said, “Everybody has different financial needs. We want to provide those folks with the right solutions at the right time so that they can manage their finances”.
D. Steve Boland, president of Retail at BofA said, “Today people throughout the country are looking for solutions that can help them establish a solid financial foundation, build and strengthen their credit, and improve the overall financial health”.
“BofA is committed to help clients budget, save, borrow and spend with confidence through a powerful combination of solutions that can be essential to achieving these goals, along with personalised guidance to support them along the way,” he added.
Recently, several other financial institutions have begun to shift away from overdraft fees. TD Bank levied the greatest percentage of deposit service charges among the large banks, at 8.9% of their operating revenue. In June, the bank debuted a deposit account that doesn't allow customers to overdraft.
In 2014, BofA launched the SafeBalance Banking account, which doesn’t charge overdraft fees by default. In the past years, it gained popularity as more than three million SafeBalance banking accounts were opened.
Some of the country's largest banks now offer services to help avoid the cost of overdraft fees. In the past year, various banks across the country saw a 40% surge in overdraft fees.
A recent report by S&P Global showed that between July 2020 and June 2021, BofA saw the highest volume of service charges compared with the largest four banks in the country.
In that period of time, North Carolina-based Charlotte Bank received $2.37 billion from deposit service charges and fees.
Meanwhile, BofA announced that its new Balance Assist offering will soon surpass the 100,000 loans. Balance Assist provides an affordable way for eligible clients to manage their short-term liquidity needs. The service was rolled out in select states in December 2020 and became available nationally in March 2021.