Tuesday, June 11, 2013

WSJ: Overdraft Fees Now Account for 60 Percent of Checking Fees

Posted By on Tue, Jun 11, 2013 at 9:16 AM

Federal regulators say they fear overdraft fees have gotten out of control.

The Wall Street Journal reports that a new industry report reveals that overdraft charges now account more than 60 percent of fees on consumer checking accounts.

"What began as a service to give customer flexibility with their accounts has turned into one of the banking industry's biggest money makers," wrote the Journal.

Traditionally, a consumer has three options when they have insufficient funds to cover an ATM withdrawal or debit card transaction: an overdraft penalty fee, an overdraft transfer fee if the bank transfers funds from a linked account, or they can choose to have the transaction denied and pay no extra charge.

But the Journal reports that "studies suggest it pays not to opt in to an overdraft program. Consumers with an overdraft program who overdrew their accounts paid an average of $225 in overdraft and insufficient-fund charges over the course of a year, according to the Consumer Financial Protection Bureau."

And the fees vary widely: some pay an average of $298, according to the CFPB, while others pay $147. The Pew Research Center also estimates that nearly three-quarters of those who sign up for overdraft protection end up using the service.

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