Wintrust Financial is the latest — and apparently the smallest — U.S. bank to eliminate overdraft fees for consumer deposit accounts.
The $52.9-billion asset company, which is based in the Chicago suburb of Rosemont, Illinois, stopped assessing the charges on Wednesday. Wintrust said that it will no longer authorize consumer transactions at ATMs and cash registers if they would result in a negative account balance, though it will offer an overdraft line of credit.
Company executives explained their decision to eliminate overdraft fees as a response to certain technological changes in consumer banking.
“With real-time notifications and other tools accessible 24/7, we have seen a decrease in overdrafts and item returns as our customers can remedy those situations before they occur,” Wintrust President Timothy Crane said in a press release.
“And we believe that eliminating these charges altogether and working with our consumer banking clients when low balances occur will strengthen our relationships with them.”
Wintrust follows the lead of three larger banks — Ally Financial, Capital One Financial and Citigroup — that have eliminated overdraft fees since 2021.
Amid pressure from regulators, many other large banks have taken more incremental steps to reduce their reliance on revenue from overdraft charges. To the extent that small banks have made changes to their overdraft fees, they have generally been more limited.
Wintrust, which operates more than a dozen different banks, previously charged $35 for each transaction that overdrew a consumer account, according to information on its website.
But Wintrust has not been particularly dependent on overdraft revenue. Last year, the company’s various banks collected between roughly $3 and $14 per account in consumer overdraft-related service charges, according to an analysis of call reports by the Brookings Institution.
The Brookings analysis, which looked at deposit accounts with balances under $250,000, found that many other banks were far more reliant on overdraft revenue. Some small banks have been collecting $75 or more annually in overdraft fees per account, said Aaron Klein, a senior fellow at Brookings’ Center on Regulation and Markets.
Klein said that Wintrust’s decision to eliminate overdraft fees is consistent with the pattern he has seen over the past few years, as overdraft reform has taken hold in certain parts of the industry.
“The general rule of thumb is, the less reliant a bank is on overdraft for their profits, the more willing they are to eliminate the product,” Klein said in an interview.
One Wintrust subsidiary, Wintrust Bank, N.A., has $9.7 billion of assets. That bank, which does business as Evanston Community Bank & Trust and North Shore Community Bank & Trust, reported a total of $990,000 in consumer overdraft-related service charges last year, which worked out to $10.39 per account, according to the Brookings analysis.
“We’re not a big overdraft bank,” Crane, the bank’s president, said in an interview following a question about the financial impact of the changes. “And again, we try to be friendly on many fronts for our consumers. So we don’t think this will be overly significant.”
“We’re not implementing other fees to offset any loss of revenue here,” Crane added.
In addition to overdraft fees, Wintrust also eliminated an item return fee that it previously charged. Later this year, the company plans to start allowing consumers who use direct deposit to receive certain payments up to two days early.
But Wintrust also said that it will continue charging overdraft and item return fees on business accounts.
Earlier this week, two smaller banks announced less dramatic changes that nonetheless aim to reduce the amount of overdraft-related revenue they collect.
On Tuesday, S&T Bancorp, a $9.1 billion-asset company based in Pennsylvania, said that it will stop charging non-sufficient funds fees on April 3. Those fees typically get charged when an item gets returned to a bank unpaid because insufficient customer funds were available.
And on Wednesday, Washington Trust Bancorp, a $6.4 billion-asset company based in Rhode Island, announced the launch of a checking account that does not charge overdraft fees, carries no monthly fee and has no minimum balance requirement.