Overdraft fees hit people living paycheck to paycheck hardest—this bank is putting an end to them

In March 2020, financial services company Ally Bank waived overdraft fees as part of its Covid-relief package in order to give the bank's most financially vulnerable customers a much-needed reprieve.

And yesterday morning — less than a week after lawmakers grilled bank CEOs on Capitol Hill — Ally said it's permanently ending overdraft fees on all accounts in an attempt to help keep people from falling behind financially.

"We know that money can be a source of stress and confusion," said Diane Morais, president of consumer and commercial banking at Ally Bank, in a press release. "Overdraft fees can be a major cause of anxiety. It became clear to us that the best way to relieve that anxiety was to eliminate those fees."

Overdraft fees are especially costly and burdensome for people living paycheck to paycheck. Online and brick-and-mortar banks alike charge overdraft fees, usually between $15 and $35 per occurrence, and costs add up quick.

Americans paid $12.4 billion in overdraft fees in 2020. The latest FinHealth Spend Report shows that 80% of overdraft fees are paid by consumers with consistently low checking account balances. Of the consumers who paid overdraft fees in 2020, 95% were considered financially vulnerably and disproportionately Black and Latinx, thereby demonstrating how overdraft fees contribute to systemic inequity within the banking industry.

Last week, in a U.S. Senate Committee on Banking, Housing and Urban Affairs hearing, Sen. Elizabeth Warren, D-Mass. accused JPMorgan Chase's Jamie Dimon and other corporate bank CEOs of failing to communicate fee relaxation effectively during the pandemic.

Even prior to the no-overdraft-fee decision, Ally has never charged overdraft fees for debit card transactions or charged more than one overdraft fee per day. In addition, Ally has no minimum balance requirements, no monthly maintenance fees, no ACH transfer fee and a large nationwide, no-fee ATM network with over 43,000 Allpoint ATMs.

Not every bank has eliminated overdraft fees for good. Most checking accounts — even those with no monthly fee — charge a non-sufficient fund and/or overdraft fee.

Select has analyzed and compared dozens of checking accounts — here are the ones on our best no-fee checking account list that also come with zero overdraft fees:

• Best with no overdraft fees: Ally Bank Spending Account (Ally's checking product)
• Best for rewards: Discover® Cashback Debit Checking

To determine which checking accounts provide the best place to deposit your money at no monthly cost, Select analyzed dozens of U.S. checking accounts offered by online and brick-and-mortar banks, including major credit unions. We narrowed down our rankings by only considering checking accounts that charge no monthly maintenance fees (and no catches to benefit from zero monthly fees).

While the accounts we chose in this article consistently have no monthly maintenance fees, we also compared each checking account on a range of features, including:

• No minimum balance requirement
• Low initial deposit of $0 to $50
• Available nationwide
• Physical branch locations and/or online accessibility
• Large ATM network
• Ease of use and account accessibility
• Customer reviews, when available

All of the accounts included on this list are Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) insured up to $250,000. This insurance protects and reimburses you up to your balance and the legal limit in the event your bank or credit union fails.

The rates and fee structures for checking accounts are subject to change without notice and they often fluctuate in accordance with the prime rate.

Your earnings depend on any associated fees and the balance you have in your checking account. To open an account, some banks and institutions may require a deposit of new money, meaning you can't transfer money you already had in an account at that bank. However, the five accounts listed above currently don't require any deposit during account opening.

Information about the Ally Bank Spending Account has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.

Ally Bank is a Member FDIC.