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Capital One to completely eliminate overdraft fees

It’s the first big national bank to take that step

Capital One Bank location
Photo (c) magnez2 - Getty Images
Capital One has become the first major national bank to announce the end of overdraft fees for its customers. The change will apply to all of the bank’s financial products.

“The bank account is a cornerstone of a person’s financial life,“ said Richard Fairbank, Capital One’s founder and CEO. “It is how people receive their paycheck, pay their bills, and manage their finances.”

Bank customers’ complaints about overdraft fees led to changes in banking regulations more than a decade ago. When customers overdrew their accounts, banks honored the purchase but assessed a $30 fee for each transaction.

Under current rules, customers must “opt in” for overdraft protection. Otherwise, a debit card transaction with insufficient funds is denied and there is no fee involved. “Bounced” checks, however, still result in a fee.

As part of Capital One’s changes, it is removing overdraft fees from its overdraft protection. Customers that overdraw their accounts with a debit card purchase won’t be charged a fee, and the bank will honor the purchase. However, to avoid the fee, customers must apply for the bank’s overdraft protection.

“Overdraft protection is a valuable and convenient feature and can be an important safety net for families,” Fairbank said. “We are excited to offer this service for free.”

Customer-pleasing move

In August, PayPal announced that it was ending late fees on buy now, pay later purchases. It cited research showing that a third of consumers believe having no late fees is an important feature in choosing a buy now, pay later payment option.

Capital One may be adopting the “no-fee” status as a way to please customers like Robert of San Clemente, Calif., who is already pretty happy with the bank.

“The Capital One online and app systems are comprehensive and easy to navigate,” Robert wrote in a ConsumerAffairs review. “Checking, savings, and credit card accounts are all right at your fingertips and easily viewed either comprehensively or individually for more detailed info.”

Under Capital One’s new system, customers can choose whether or not to access overdraft protection. All customers currently enrolled in overdraft protection will be automatically converted to No-Fee Overdraft on the launch date in early 2022.

"Capital One’s complete elimination of overdraft and NSF fees is a landmark moment for American families," said Lauren Saunders, associate director of the National Consumer Law Center. "This move by Capital One will have tremendous benefits for the most vulnerable consumers. It’s critical we keep working to make the banking system more inclusive and fair for all.”

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