Still Charging Overdraft Fees? You’re Doing It Wrong
Three years ago, Texas-based Amplify Credit Union took a decision to break with overdraft fee income. Our results challenge conventional wisdom: We have since seen a steady decrease in deposit charge-offs, and now we've expanded fee-free programs to commercial customers, too.
By Kendall Garrison, CEO of Amplify Credit Union
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As the CEO of a Texas-based financial institution, I know one thing for sure: If your company is in the news, it’s probably not for the reasons you’d like.
Case in point: Over the past few weeks, banks and credit unions have made national headlines for pushing lawmakers to increase the amount of money they can charge in overdraft fees.
Honestly, I can’t believe this is a hill we’re still choosing to die on.
Overdraft fees are predatory, regressive and outdated. The only reason they still exist at scale is because they work for the income statement, not the customer. And with the average American feeling the squeeze on their wallet, our dependence on overdraft fees isn’t just a moral problem. It’s a strategic liability.
If you run a financial institution and your business model still depends on overdraft fees, it’s time for a hard reset.
How and Why We Flipped the Switch
On February 2, 2022, Amplify Credit Union turned off our bank fees forever. No more overdraft fees, ATM fees, transfer fees – gone, gone, gone. We walked away from at least $2 million in annual fee income, and we did so because, frankly, an income model dependent on charging a minority of members the majority of fees no longer made sense to us.
This wasn’t an overnight decision. We ran the numbers. We projected the impact. And we decided to rebuild our banking experience from the ground up.
Along the way, we found ourselves poking holes in a lot of myths about banking behaviors. The biggest being that banks and credit unions need to charge fees to protect people from spending themselves into a hole.
That framing is nonsense. It punishes people living paycheck to paycheck and labels them as the problem. In fact, one of the benefits of fee-free banking to Amplify has been a sustained decrease in deposit charge-offs from overdraft. It turns out your members have more money if you don’t actively take it from them.
Oh, and despite what the pundits would have you believe, we can still afford to offer free overdraft protection to our members even without overdraft income.
This Isn’t Charity – It’s Common Sense
I’m not pitching philanthropy here. I’m pitching business common sense.
Fee-free banking doesn’t mean we don’t make money. It means we think about our revenue opportunities more holistically, and we only choose the ones that have actual value to our customers. It means we charge our members fees when they borrow our money, but not when we’re "borrowing" theirs.
It’s a model that worked pretty well for centuries – at least until financial institutions got addicted to the kind of non-interest income that disguises penalties as services. We’re just going back to the basics of banking.
And this approach has allowed us to rethink other areas of our business too. When we launched fee-free treasury management services in 2024, our commercial deposits were an afterthought in our portfolio. Now they’re our fastest-growing segment, increasing new business deposits by double digits year over year.
At a time when leaders are looking to make every dollar count, we have a track record that businesses and nonprofits can trust. Our commitment to fee-free banking may represent a moral stand, but it’s been a big boost to our commercial banking sales too.
The Path Forward Isn’t Easy, But It’s Open
Is it hard to walk away from millions in easy revenue? You bet. A change like this doesn’t happen without the full faith and backing of our board of directors, and even then, it took our team almost two years to ensure we could deliver with confidence.
Yes, we chose to go fee-free because we felt it was right. But we also chose to go fee-free because we could see the writing on the wall. With the big banks moving away from overdraft income, we felt – and still do – that dependence on account service fees for deposits would become a liability.
When it comes to turning off fees, regional banks and credit unions like ours could either get the credit for going first or be tied for last with everyone else.
Since going fee-free, we’ve also seen some of the highest employee engagement numbers in Amplify’s history. Our team shows up to work every day with clarity, and there has never been stronger alignment between our mission and our business model. It’s boosted our recruitment efforts and allowed us to bring on some of the smartest folks in the industry.
It works. We’re living proof of that. And we’re just getting started.
No More Excuses
I’m not here to preach – OK, maybe I’m here to preach a little, but still. Banking doesn’t have to be a zero-sum game. It doesn’t have to be opaque. And it sure as hell doesn’t have to be built on the backs of the financially vulnerable.
So here’s my invitation to you:
If you’ve ever toyed with the idea of chucking the status quo, let us be a resource. We’ve had conversations with many financial institutions these past three years who want to build their own roadmaps to fee-free banking, and it’s still the one thing we do better than anyone else.
Get credit from your customers for going first.
And don’t die on the wrong hill.
