Overdraft Revenue Down for Banks Even Though Consumers are Paying More

Overdraft revenue for banks fell by $3.6 billion in 2011, even though the average bank customer paid an average of $30 per overdraft charge.  This is $2.50 higher than the average fee paid just over a year ago, according to the American Banker.

Banks are trying to recoup some of the revenue lost in fees once made through debit card transactions and other regulatory changes.

Federal regulations have limited banks’ ability to charge customers for overdrawing their accounts unless the “opt in” to programs that cover excess charges for a fee.  Now they are trying to make up revenue by charging more for these overdraft protection programs.

The number of overdrafts per year, however, is also falling.  In 2011 households averaged 6.7 overdrafts per year, drown from 8.2 in 2010 and 9.8 in 2009, according to a study by Moebs Services, Inc.

What should an average consumer do to protect himself or herself against increasing overdraft fees?  While the simplest answer is not to overdraw one’s account, sometimes the best intentions don’t always work out. 

Pay attention to any overdraft protection plan for which you may sign up.  Make sure you know the amount of the fee that is charged should an overdraft occur.  Check your statements to make sure that additional charges are not added or that you agree that funds were truly overdrawn.  Also pay attention to mailings you may receive that increase your fees.  See if there is an ability to negotiate.  If you feel your bank charges are higher than others, it may be time to reassess your relationship.  Often credit unions charge lower fees than banks, however, they may not have as many additional services available.

Overdraft fees are just one of many fees that you should anticipate will increase this year.  As government regulation becomes more intense, banks are forced to pass more of the costs on to consumers.