Bank Fees and Household Financial Well-Being

In this study, we examine policy changes from large U.S. banks between 2017 and 2022, which eliminated non-sufficient funds (NSF) fees and relaxed overdraft policies. Using individual transaction-level data, we find that the elimination of NSF fees, not surprisingly, resulted in immediate reductions in NSF charges across the income distribution. However, relaxing overdraft policies resulted in reductions in overdraft fees only for wealthier households, along the dimensions of income and liquidity, and only those enjoyed subsequent declines in late fees, interest payments, account maintenance fees, and the use of alternative financial services, such as payday loans. Our results thus suggest that the policy changes were not substantial enough to significantly reduce the financial stress of the more vulnerable households. As our setting features multiple treatments and variation in treatment intensities, we theoretically motivate and empirically implement a new stacked event study estimator closely related to de Chaisemartin et al (2024) to address the biases arising from staggered DID specifications.