Consumer Overdraft Fees Increase During Recession: First-Time Phenomenon

CHICAGO--(BUSINESS WIRE)--The national median for overdraft (OD) fees on consumer checking accounts, debit cards and ATMs increased to $26 per incident in 2009 from $25 per incident in 2008, a 4 percent increase, led primarily by Wall Street Banks – those with assets of more than $50 billion.

“This is the first time in our 22 -year history of collecting this data that we have seen OD fees increase during a recession”

These findings are the result of a just-completed nationwide survey of more than 2,000 commercial banks, savings institutions and credit unions that was conducted by Moebs Services, an independent, nationally recognized economic research firm in Lake Bluff, Ill. The study, conducted in June, examined pricing for OD service fees charged to consumers by financial institutions throughout the country.

“This is the first time in our 22 -year history of collecting this data that we have seen OD fees increase during a recession,” said Mike Moebs, CEO of Moebs Services, whose firm collects and analyzes pricing trends for government agencies such as the Federal Reserve and General Accounting Office, and financial institution clients.

Key results for 2009 include the following:

• 44.5 percent of all banks and credit unions have OD income greater than net income.
• Higher OD fees were led by Wall Street banks, which charged a median price of $35 per overdraft vs. all financial institutions, which charged a median price of $26 per overdraft.
• The South continued to lead in OD charges regionally, with a median charge per overdraft of $29.00 vs. $25.00 for the North, East and West regions.

• The US Postal Service is increasing its price for OD fees more than Wall Street banks – to $35 per incident.
• 45 percent of Wall Street banks tier OD prices, vs. 2 percent of Main Street banks and credit unions. The OD charges range from a first-time charge of $25 up to a $35 charge per incident.
• 54 percent of all financial institutions offered a formal OD program, down significantly from 69 percent in 2008.
• 86 percent of all financial institutions that offer OD services allow the consumer to opt-out at any time.
• Less than 20 percent of all financial institutions pay checks in the order from large to small, with the vast majority paying checks in the order of presentment to the financial institution.
• 35 percent of all financial institutions allow consumers to overdraw their accounts at an ATM or with a debit card, charging a median of $26 for this service.

“My firm is a neutral, third-party, objective source that has been collecting primary empirical data about financial institutions for more than two decades,” said Moebs. “The results from this year’s survey are among the most compelling we have seen, both for consumers and financial institutions.”