Bank Fees in America: Where We’ve Been and Where We’re Going

April 1, 2021

From a distance, the state of the economy and health in the U.S. is on the upward swing. Unemployment continues to drop. The Bureau of Labor Statistics estimates that the unemployment rate fell to 6.2% in February 2021, a dramatic decrease from its April 2020 high of 14.8%. COVID-19 vaccination has also ramped up in recent weeks. According to the Centers for Disease Control and Prevention, 29.4% of the population, or more than 97.5 million people, have received at least one dose of the vaccine. 

Amidst it all, consumers have sat down and taken a hard look at their finances. In a recent Cushion survey, more than 87% of people say they have a financial goal for 2021, the majority of whom are focusing on saving and reducing their debt this year. 

It’s easy to see why saving and reducing debt are top priorities for people. The pandemic ravaged personal and financial lives in 2020. Reports indicate that COVID-19 has only widened the wealth gap, with people of color, women, and other adverse populations being disproportionately affected. A 2020 survey of more than 4,000 Cushion users found that 79% of people felt okay or pleased with their pre-pandemic financial situation. By August, 79% of people felt a little worse or much worse about their situation. 

Here’s a look at how bank and credit card fees have changed in recent years. But perhaps more importantly, we’ll look at what these changes could mean for consumers in the months to come.

Pre-pandemic Bank Fees

The fees charged by financial institutions have long been an issue for consumers. Bank and credit card fees, including credit card interest, are a $200 billion industry annually.

In the past decade or so, laws have been passed to protect people financially. For instance, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 — or the CARD Act — was designed to shield credit card holders from deceptive practices by credit card issuers. In 2010, another rule mandated that banks must ask customers whether they want to opt into overdraft protection before charging them a fee.

Despite these protections, consumers continue to get hit with fees, and a small number of them suffer most greatly. A 2017 report by the Consumer Financial Protection Bureau said that 30% of consumers overdraw their checking account each year, but 8% of the people who overdraft more than 10 times per year pay 74% of overdraft fees.

Cushion has analyzed more than $13 billion worth of bank and credit card transactions. Various charges — including monthly service fees, ATM fees, and late fees — showed little change between February 2019 and February 2020. Average ATM fees per person per month hovered around $1.75, late fees around $3.50. The most drastic change was in overdraft fees, which fluctuated between $40–50 per person per month, equating to about one or two charges.

Then COVID-19 hit like a ton of bricks. While employment and the healthcare industry were tanking, bank and credit card fees hit their prime.

Bank Fees in the Age of COVID-19

It wasn’t immediate. In fact, for a moment, it seemed like those who were constantly bombarded with fees might actually be able to catch their breath. 

In a previous article, Cushion reported that the average combined bank fees and interest charges per person per month decreased from $106.70 in March 2020 to $90.60 in April 2020. By August, though, it had risen to $130.60. At the time, it was the highest average that Cushion had seen since launching in 2018. For overdraft fees alone, the average fees more than doubled, from $34.23 per person per month in April to $70.68 in August. 

In those early months of the pandemic, consumers could likely thank the dip in fees to governmental calls for banks, utility companies, and landlords to give people a break. Many people also received a $1,200 stimulus check to hold any potential overdraft fees at bay.

It was then that banks began to take action. They developed relief programs to aid their customers “in these unprecedented times,” but in creating these programs, they had to be wary of the time and resources needed to make the changes. Banks logistically couldn’t flip a switch to turn off all fees, and they also had to keep their bottom line in mind. Banks are businesses after all, with a significant portion of their income coming from fees. Their happy medium: Continue charging the fees, but offer a refund if a customer requested one.

By the end of 2020, fees were still climbing. In December, average combined bank fees and interest charges had risen to $163.35; overdraft fees per person per month had also risen to $100.77. 

Fees rose for several reasons. In some cases, customers had overdrafted their account, often to put food on the table. Thinking they were in the wrong, they refrained from contacting their bank because they figured it was useless. For others, they didn’t have the time or energy to contact their banks. And for others yet, banks flat out refused them a refund.

What to Expect in 2021

The year 2021 rolled around, as did a new wave of $600 stimulus checks. In January, Cushion saw another dip in fees, much the same as the one in April 2020. The average combined bank fees and interest charges per person per month now sat at $146.76, with overdraft fees alone lowering to $84.94. This dip can likely be attributed to the second round of stimulus checks, though an improving employment rate may have also contributed.

In February, those numbers barely budged, with average bank fees and interest charges rising less than one dollar. For now, bank and credit card fees have seemed to plateau.

But for consumers’ sake, we are left wondering: Where will things go from here? Did the January dip foreshadow a brighter future for consumers experiencing sky-high fees, or is it only a matter of time before fees go back up? Unfortunately, February didn’t give us any signs.

It’s important to remember that banks make money in two major ways: interest and fees. The New York Times reports that current interest rates are staggeringly low to aid with economic recovery. To make up for lost revenue there, it’s possible that banks will hike fees, either in cost or in the amount of fees being charged.

One major bank recently sent out emails to customers stating that the maximum charge for late payment fees and return payment fees will increase from $39 to $40 beginning in April. It’s currently unclear whether other financial institutions will increase their rates this year, but consumers should prepare for their banks to follow suit.

Cushion’s data has shown over the past year that banks are charging more fees, but they’re also being more generous with refunds. “So why not just charge less fees?” says Paul Kesserwani, Cushion founder and CEO. “The answer is that they’re banking on people not asking for refunds — no pun intended.” By continuing to charge fees, there’s at least the possibility that customers will be too busy or unmotivated to challenge their bank — an easy win for the banks.

How can Cushion help me?
Cushion Bill Pay gives you more visibility and control over your finances than ever before. Many people get hit with bank fees—such as overdrafts and late fees—due to cash flow problems. With Cushion, you can consolidate and track all of your bills and BNPL payments in one place, plan your budget by reviewing what’s coming down the pike, and avoid overdraft fees by temporarily pausing payments that might overdraft your account and resuming them when you are ready.

Final Thoughts

Right now, it’s more important than ever for you to be vigilant about requesting refunds for your fees, whether you do it yourself or sign up for a service to do it for you. 

This year has proven people’s resilience. They’ve been forced to do more with less, and somehow they’ve still managed to make progress on their debts — national credit card debt decreased $76 billion after the initial COVID-19 outbreak — as well as set money-related goals for the year to come. 

Of the 87% of people have set financial goals for 2021, 6% have said that their goals are going exceptionally well so far, more than half have said that they’re making progress little by little, and another 33% said that they’ve fallen off the wagon but they’re determined to keep working toward their goals.

Now is not the time to give up on pursuing bank and credit card fee refunds. The key to success is being kind, patient, and persistent when negotiating with customer service representatives. Amidst a lingering global pandemic and economic recession, you should recognize your power and responsibility to fight for your hard-earned money. After all, the bank isn’t going to do it for you. 

Cushion helps you waste less money, save more, and live a financially healthier life. We monitor your bank and credit card accounts 24/7, find and alert you about pesky fees, let you know which fees are negotiable, which banks are cooperative, and can even automatically negotiate on your behalf.* To date, Cushion has secured customers more than $13 million in bank and credit card fee refunds—and we’re just getting started.

*Cushion only negotiates fees with high refund odds. We cannot guarantee any negotiations, a regular frequency of negotiations, or fee refunds—your bank makes the final call.

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