U.S. bank overdraft fees climb to four-year high as consumer strains, policy shifts lift revenue

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U.s. bank overdraft fees rise

Highlights

U.S. banks collect $1.6 billion in overdraft fees in Q3, up 9.4% from the previous quarter and 23% from Q1 2025 levels after policy rollback.
JPMorgan Chase and Wells Fargo together generate $590 million in Q3 overdraft fees, with JPMorgan's up 32% and Wells Fargo's up 17% from Q1 2025.
First-Citizens leads with a 200% increase in overdraft fee revenue since Q1 2025 as regional lenders outpace larger peers and Democrats plan CFPB scrutiny.

Third-quarter increase follows rollback of fee cap

As reported by Reuters, U.S. banks collect $1.6 billion in overdraft fees in the third quarter, up 9.4% from the previous three-month period, based on Reuters calculations confirmed by KBRA Financial Intelligence.

Fee revenue falls to an all-time low in the first quarter of 2025, when President Donald Trump takes office. Congress then passes a resolution, signed by Trump in May, rolling back a Consumer Financial Protection Bureau rule that would have capped overdraft fees at $5 per transaction but never takes effect.

Since then, fees rise steadily and are up 23% in the three months ended September from the first full quarter of Trump's second term, although they remain below historic peaks. The fees had fallen sharply under former President Joe Biden, whose administration emphasizes consumer protection.

Democrats say they plan to scrutinize CFPB oversight and enforcement after winning control of both houses of the U.S. Congress in this month's midterm elections. Senator Elizabeth Warren, who helped create the CFPB after the 2007-2008 financial crisis, is expected to chair the Senate Banking Committee.

Consumer health concerns and bank-by-bank trends

Economists say the jump in overdraft fees could be an early warning sign of weakening consumer finances. Real, inflation-adjusted wages have been falling since April, while delinquency rates on car loans and credit cards have been little changed for about a year, according to Moody's Analytics.

"I wonder if increasing overdrafts may be a leading indicator of developing credit problems," Moody's Analytics chief economist Mark Zandi says. Adam Rust, director of financial services at the Consumer Federation of America, says it is impossible to separate what banks are charging in overdraft from developments at the CFPB, as the Trump administration seeks to cut the agency's workforce and shifts oversight away from areas including student loans, medical debt, digital payments and consumer data.

JPMorgan Chase and Wells Fargo together charge $590 million in the third quarter, roughly equal to the rest of the 20 largest banks combined. JPMorgan's increase is 32% from the first quarter of 2025 and Wells Fargo's is 17%, while Citi has eliminated overdraft fees in 2022.

At Bank of America, overdraft fee revenue rises 49% since the first quarter of 2025 but totals $55 million, well below JPMorgan and Wells Fargo. The bank cuts its overdraft fee to $10 from $35 in 2022 after CFPB criticism, while JPMorgan and Wells Fargo have added grace periods and other practices to limit charges.

Overdraft fees are rising fastest at some large regional lenders. First-Citizens, based in Raleigh, North Carolina, posts a 200% increase in overdraft fee revenue versus the first quarter of 2025, the largest rise among the 50 biggest U.S. lenders, while industry adviser Moebs Services says many banks still expect regulators or lawmakers to revisit the issue.

In a previous article, we explained how the S&P 500 slide was driven by tech earnings and rising Treasury yields.

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