Bank overdraft fees to total $38.5 billion Just 10% of consumers paying nearly 90% of the record windfall as fees jump despite recession, research report says. By Julianne Pepitone, CNNMoney.com contributing writer Last Updated: August 10, 2009: 7:00 PM ET NEW YORK (CNNMoney.com) -- U.S. banks will collect a record $38.5 billion in overdraft fees this year, with nearly all the revenue paid by just 10% of customers, according to a research report released Monday.
The windfall is nearly double the $19.9 billion collected in 2000, as overdraft fees drift higher despite the recession, said Mike Moebs, chief executive of research company Moebs Services.
"Overdrafts are the mother lode of all service-related charges, and they're often the only source of capital," Moebs said. "Still, we had never seen fees go higher in any recession until now."
The national median overdraft fee rose to $26 from $25 in 2008, while larger Wall Street banks charge a median of $35, Moebs said.
Moebs Services collected data from 2,000 banks and credit unions, and the firm found that 44.5% reported a net overdraft revenue higher than their net income. Fee hikes have helped banks boost profit amid the recession, Moebs said.
"Most people paying these fees have a credit score below 590 or so," Moebs said. "Beyond that, they're a whole gamut of people: rich and poor, men and women."
Government-mandated overdraft fee increases "are leading the charge," Moebs said. For example, he said, a local U.S. post office decides to increase its overdraft fee to $35. Area retailers note the increase and in turn raise their own fees. Finally, banks follow suit.
"I doubt anybody in Congress is aware of this," Moebs said. "The customers are angry, and they have a right to be angry."
The Federal Reserve and other lawmakers are discussing rules about overdraft fees, Moebs noted, but he thinks cash-strapped customers need more transparency -- and soon.
"We need to do everything we can for consumers: send e-mails, text messages, voice-activated alerts," Moebs said. "It's essential that we send a wake-up call, especially to Wall Street banks."
A JPMorgan Chase (JPM, Fortune 500) spokesman told CNN that his company did not raise overdraft fees from last year, saying that the bank charges overdraft fees depending on number of times it occurs ranging from $25 to $35.
A Bank of America (BAC, Fortune 500) spokeswoman said although her company sent customers letters earlier this year about possible increases, it decided not to raise the $35 fee. Overdrafts of less than $5 incur a $10 fee, she said, and the bank may waive unemployed consumers' fees on a case-by-case basis.
Other banks were not reached for comment by CNN.
--CNN's Ekin Middleton contributed to this report.
First Published: August 10, 2009: 4:41 PM ET
Posted by The Bigfoot on :
I still don't understand why they can't just stop payment on accounts that get below a certain threshold. The whole overdraft thing in my mind is just another form of predatory lending IMO.
Posted by IWISHIHAD on :
The banks are just a bunch of vultures waiting for their prey.
They have a way around everything with the government allowing it to happen.
Legal loansharking.
Posted by glassman on :
The national median overdraft fee rose to $26 from $25 in 2008, while larger Wall Street banks charge a median of $35, Moebs said.
OK<
now: U.S. banks will collect a record $38.5 billion in overdraft fees this year, with nearly all the revenue paid by just 10% of customers,
crunch the numbers...
35 billion$ say 35$ per? that 1 billion overdrafts (give or take)?
then you consider that it's only 10% of the customer base? say there's 200 million people banking with checking in the US (probably a little high) so we get 20 million people making 50 overdrafts each year...
keep in mind that i am underestimating the numbers at each step of th eway. the numbers seem to indicate the problem is really much worse.
what does that tell us?
Posted by The Bigfoot on :
It tells us those folks should be required to switch to prepaid cash cards where once the cash is gone it is gone. Penalizing them with $26 overdrafts every (365/50) 7.3 days does not help them learn how to manage their money better. It just gives em less money to manage.
Posted by glassman on :
well, a canceled check fee is about 40$ these days so the overdraft fee is cheaper.
but i see a large group of people that seem to be employed that are not even making it week to week...
i am assuming these are not the poorest of the poor because they have these accounts and are able to pay the fees....
this looks alot like payday loans to me...
Posted by IWISHIHAD on :
Quote Glassman:
"this looks alot like payday loans to me..."
_________________________________________________
Exactly.
It use to be we could float our funds for a few days, but the banks make sure we can't anymore since the use of computers.
Only the banks are allowed this privilege now days.
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Posted by jgrecoconstr on :
The guy I work with's wife is one of these people. She thinks nothing of writing checks when she has no money to back them up because she has overdraft protection. There have been many times in the past to many to remember where he would complain that she had 200-400 in fees for one week and this woman is a teacher. I always told him to take the checkbook away but he has no spine so he just goes along with it.
Posted by Happy Valley on :
quote:Originally posted by The Bigfoot: It tells us those folks should be required to switch to prepaid cash cards where once the cash is gone it is gone. Penalizing them with $26 overdrafts every (365/50) 7.3 days does not help them learn how to manage their money better. It just gives em less money to manage.
Completely agree with you BF but banks are not interested in people learning to manage their money...Responsible money management would just cut into their bottom line...
Most people have some form of direct deposit, whether it be from their employer or from the state...Banks know the overdrafts are gonna get paid, cuz they suck the cash out the minute the direct deposit hits...
Just an ongoing cycle for these folks that are living paycheck to paycheck...
Posted by Ace of Spades on :
which banks have the highest overdraft protection???
Mine can go $700 in the negative so my overdraft limit is $700
Posted by $tock Weazel on :
I'm pretty sure some have $2k plus 'protection'.
W/ some banks, when you go overdraft they put the transactions in order from greatest to smallest. So say your balance is $100- and you have 4 transactions go through for $33, $.55, $4, and 142.00. They will line them up from greatest to smallest so they can charge you overdraft fees on each transaction. $35 x 4 = $140, rather than $35 --- Criminal innit?