The Best & Worst Places for Overdrawing Your Checking Account

Moebs Study Gives Surprising Result

LAKE BLUFF, Ill.--(BUSINESS WIRE)--Half of consumers, who overdraw their checking account, do so by $40 or less. 34 million consumers, or about 26 percent of consumer checking accounts, do this 10 or more times a year.

“Consumers, especially those who overdraw their checking account 10 or more times a year, will pay significantly less in fees if they bank with a community bank or credit union that offers overdraft services”

If you are going to overdraw your checking account, either intentionally, or like most, unintentionally, where’s the worst place to do this? Answer: bouncing a check from a checking account at a bank or credit union that doesn’t offer an overdraft service. Why? Your bank will return the check non-sufficient funds (NSF), and charge you $28, and the merchant you gave the check to will charge you $30, bringing the grand total to $58.

After a study that included 1,240 banks, 1,292 credit unions, and 832 national retail merchants like Wal-Mart, Home Depot, Walgreens, Safeway and others, economic research firm Moebs $ervices found 20.5 percent of banks and credit unions no longer provide overdraft service, or will always bounce your check if funds are not available. Merchants seem to have picked up on this. The study also showed that 40 percent of national retail merchants will not accept checks for purchase of goods or services, thus requiring cash, debit card, or credit card.

Financial Institutions That Won’t Bounce Your Check

At Wall Street Banks, those with $50 Billion or more in assets, you can get overdraft service but it will cost you $34 per check. Community banks and credit unions charge $25. “Consumers, especially those who overdraw their checking account 10 or more times a year, will pay significantly less in fees if they bank with a community bank or credit union that offers overdraft services,” points out Michael Moebs, Economist and CEO of Moebs $ervices. “Chase, Bank of America, Wells Fargo, US Bank and the other huge banks are not the place to have your checking account if you think you may overdraw your checking account, especially 10 or more times in a year,” says Moebs.

The Frugal Way to Overdraw

The Moebs Study concluded that for consumers who end up with a negative balance of less than $100, the most cost efficient provider of overdraft funds is an internet or brick & mortar payday lender. Payday lenders have a median charge of $17.50 for a small loan of $100 or less, which is sufficient to cover most consumers’ negative balance checking accounts.

Different prices at different places

According to the Moebs Study these cities have ODs at or great than $30: Atlanta, Cincinnati, Dallas, Las Vegas, Miami, Minneapolis, New York, Philadelphia, Phoenix, Pittsburgh, Tampa, and Washington D.C. Yet these urban areas offer overdrafts at $25 or less: Boston, Kansas City, St. Louis, Sacramento, San Antonio, San Diego, and San Francisco. According to Mr. Moebs, “the best place to have an overdraft is San Francisco were the median price is $22.50 while the worst place is Miami were the median is $30.95. Obviously the institutions in the Bay Area of San Francisco recognize the consumer need for a safety net while in Miami an overdraft is still a penalty.”

About Moebs $ervices

Since 1983, Moebs Services has been collecting primary empirical data about financial institutions’ services, pricing, operating expenses and financial condition and analyzing the data in a counter intuitive manner, which provides solutions that make sense. For more info please visit www.moebs.com