Overdraft Fee Revenue in the U.S. Falls to $31.6 Billion in 2011

LAKE BLUFF, Ill.--()--Depositories received $31.6 billion in overdraft fee revenue in 2011, a decline of 4.5 percent from 2010. Analyst had expected less than $30 billion. These figures reflect the findings of a February 2012 survey of 2,273 banks and credit unions completed by Moebs $ervices, an independent economic research firm. In addition to the survey, Moebs also analyzed more than 12,000 reports looking at service charge income in the banking industry, and found that banks and credit unions enjoyed an overall rise in revenue in 2011. The Moebs study found that the national median price for an overdraft fee increased to $29, up from $27.50 in 2010. According to Michael Moebs, CEO of Moebs Services, financial institutions increased the prices of overdrafts to cover anticipated costs brought on by the heightened regulatory environment of the FDIC and the implementation of Dodd Frank Act.

The Overdraft Landscape In 2011

After peaking at $37.1 Billion in 2009, financial institutions have lost $5.5B, or 14.8 percent, in overdraft fee revenue over the past two years. The median national price has increased by 16 percent to $4 in 3 years. The frequency with which consumers overdrew their checking accounts in 2011 also saw a decline. “The average number of overdrafts per account, per year, has fallen from a peak of 10.5 in the 3rd quarter of 2008 by 29.5 percent, to 7.4 almost three years later,” said Moebs. “The numbers indicate a fall off in volume, a rise in prices, and a loss of revenue, yet the overall market appears to have bottomed out. Amazingly, given all of the polar forces at play in the overdraft market -- volume, price, revenue, a slumping economy, high unemployment, regulator restraint by FDIC, and legislation by Congress -- the overdraft market is rising like the mythical phoenix and coming back,” noted Moebs. “It appears that the American consumer is saying they want overdrafts, but they want them as a reasonably priced safety net overdraft, and NOT an old fashion high penalty priced overdraft.”

Year  

Revenue
(Billions)

 

National
Median
Price

 

Average
ODs Per
Account

2011   $31.6   $29.00   7.4
2010   $33.1   $27.50   8.2
2009   $37.1   $26.00   9.8
2008   $35.4   $25.00   9.8
2007   $34.6   $25.00   9.7
Source: Moebs $ervices Analysis &Surveys and FDIC, NCUA, OCC & Federal Reserve

The Price To Overdraw Continues To Change

Almost one third, or 29.3 percent of all financial institutions, changed the amount they charge customers who overdraw their accounts. Of those who changed, 14.6 percent lowered their price, by an average $4 to $25. Main Street banks and credit unions with assets less than $100 Million, charge customers a price of $25 per overdraft.

Mega banks, with assets greater than $50 Billion, charged customers a median price of $33.50 per overdraft. As a whole, all banks were at $30, and all credit unions were at $25.

“More and more banks and credit unions are lowering the price of overdrafts,” points out Moebs. “This decision bodes well for these institutions as they try to reclaim lost market share to payday lenders, who only charge consumers a median price of $17.50. The closer financial institutions get to payday lenders, the more consumers will bank with Main Street institutions, and rely less on Payday lenders and the mega banks during this difficult economy,” remarks Mr. Moebs.

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

Contacts

for Moebs Services
John Lopez, 415-517-9760
JLopez@Hardenpartners.com

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Contacts

for Moebs Services
John Lopez, 415-517-9760
JLopez@Hardenpartners.com