Younger generations pay the most in bank fees, report finds
Bank customers between the ages of 18 and 41 are paying more than three times as much in ATM and overdraft fees compared to baby boomers with checking and savings accounts, according to a Bankrate survey released Tuesday.
Baby boomers pay an average of $2 a month in bank fees, while Gen Xers — people ages 42 to 57 — pay $4 on average, the survey found. By comparisons, the typical millennial pays $16 a month, while Gen Zers pay $19. The poll also found that younger customers are much more likely to have the type of accounts that charge monthly fees.
Bank overdraft fees in the U.S. have hit an all-time high. In 2021, the average fee for overdrawing your account rose to $33.58, a 22-cent increase over the past two years, according to a different Bankrate analysis. Among major U.S. cities, people living in Baltimore, Houston and Philadelphia paid the highest overdraft fees last year at more than $35. Cincinnati, Los Angeles and St. Louis paid the lowest fees at around $31.
Cash cow for banks
Big U.S. banks have generated about $9 billion annually in revenue from overdraft, ATM and other fees in recent years, according to the Center for Responsible Lending, or CRL. The fees have become somewhat of a cash cow for banks over the past 20 years, some experts have said.
Taylor Roberson, a fintech regulation expert at CRL, said Bankrate's survey confirms what researchers have known for years about millennials baring the brunt of banking fees.
"What this really means is the most financially vulnerable are being hit the most with fees," she told CBS MoneyWatch.
Although consumers can switch banks to avoid excessive fees, Roberson said a more comprehensive solution is for U.S. banking regulators or for Congress to cap the charges.
Some federal lawmakers, including Sen. Elizabeth Warren, D-Massachusetts, are pushing to shrink the amount of revenue banks generate from fees, arguing the charges primarily hit low-income customers and households of color. In response, some banks have eliminated overdraft or ATM fees.
Capital One last month became the largest U.S. bank to say it would ditch overdraft and insufficient fund fees. CEO Richard Fairbank said Capital One made the move to bring "humanity to banking." Ally Bank announced in June it would no longer charge its $25 overdraft fee for all customers, no matter what type of account they hold. Alliant and Discover have also removed overdraft fees.