Diving Brief:

  • Frost Bank, one of Texas’ largest lenders, is eliminating the insufficient funds (NSF) fee and expanding its overdraft grace program, the bank said in a statement. A press release Monday.
  • All customers with a personal checking account can withdraw $100 or less without incurring fees — not just those who meet a minimum monthly direct deposit requirement, the bank said.
  • The updates will cost Frost Bank up to $3.5 million in lost fee revenue per year, the bank said.

Overview of the dive:

Frost Bank is hot on the heels of several other lenders who have opted to lower NSF fees while maintaining some overdraft fees in recent times. Merger partners New York Community Bank and Flagstar Bank have announced that they waive NSF fees this summer.

And over the winter, a host of major lenders, including Bank of America, Wells Fargo, American bank and M&T decided to eliminate NSF fees while reducing their reliance on overdraft.

Frost Bank became one of the first in a wave of lenders to overhaul its overdraft and related fee model in April 2021, when the company launched an overdraft grace feature that allowed customers who had received more than $500 in direct deposits that month to overdraw their accounts up to $100 without incurring fees.

The $51.3 billion asset bank estimated that the program has helped more than 64,000 families obtain needed goods and services without paying fees since 2021.

“We have had a customer-friendly program for many years. And a lot of the changes you see in the industry are things we’ve done,” Jimmy Stead, director of consumer banking at Frost Bank, told Banking Dive, highlighting offers such as free overdraft protection between linked accounts and paycheck early access.

All bank customers with a Frost Personal or Frost Plus account will have access to the Overdraft Grace Program unless they decide to opt out.

“We understand that sometimes people make a mistake or have a need that requires a little more money,” Stead said. “We are the friend who will find them $100 when they need it.”