Few things can ruin your day like a notification from your bank alerting you (or should I say, thanking you?) for taking out a bit too much from your checking account. Ugh. Those few dollars you spent beyond your balance now mean an extra $35 or so down the drain. Yikes. 
For some, this is nothing more than a big bummer that might make them rein in their spending (or at least check their balance before withdrawing cash). But for many Americans living paycheck to paycheck, overdraft fees have become a constant handicap that adds insult to injury in tough times. For example, a series of steep medical bills charged to a near-empty account could inflate the owed balance by hundreds of dollars in the end. Looking at it this way, punishing an account holder who already lacks funds with an overdraw fee per transaction sounds more like a poverty tax in action. 
You’d think your bank would decline a debit card charge if your account didn’t have enough funds to complete a purchase, but where’s the profit fun in that? Banks began charging overdraft fees in the 1990s and that sneaky penalty against underfunded transactions made them over $8 billion in 2021. Also, according to a report by Oliver Wyman, US consumers who overdraw account for over three-fourths of the profitability of mass market checking accounts.
What’s that look like in money terms? Compare top players—like JPMorgan, Wells Fargo, and Bank of America—that made over $1 billion each thanks to these fees to the frequent overdrafters who tend to have an average checking account balance of $600 and a credit score around 582. This pool makes up only 10% of mass market consumers yet creates over 80% of that overdraft revenue. Wow.
It turns out these fees are so sus that the Consumer Finance Protection Bureau (CFPB) is running an investigation on their transparency and proportionality, and is pushing for new regulations. As part of this investigation, the CFPB put out a request for Americans affected by overdraft fees to share their experiences and has received close to 50,000 submissions. Some heart-wrenching complaints included, “Overdraft fees and hidden fees prey on people, especially those who are already underprivileged and struggling,” and “Charging for overdraft is like picking at the bones of a decomposed corpse.”
With all the bad vibes in the air, some banks preemptively washed their hands of the practice this year: Ally Bank and Capital One completely eliminated overdraft fees, JPMorgan gave a window to replenish insufficient funds, and Bank of America announced reduced fees.
However, to end overdraft fees for good, the federal government may have to intervene. Otherwise, this vicious cycle will continue to punch down those who can’t afford it.—Isabel
