This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Overdraft Fees: Banking Comeback Player of the Year

NEW YORK ( BankingMyWay) -- The 2010 Dodd-Frank financial reform bill fought back against bank overdraft programs that had been ripping off consumers.

Has the legislation helped?

Bank overdraft fees were considered a plague among customers but a boon to financial institutions. And while the overdraft fees trended down in the immediate aftermath of the Dodd-Frank reform, overdraft fee revenue is on the rise again.

A report out from Moebs Services shows overdraft fee revenue rising 2.1% through the first half of 2012, to $31.5 billion, a rise of $700 million.

Do consumers never learn? Bank overdrafts have made a strong comeback this year due to demand from consumers who see the fees as not as onerous as they used to be, according to the Lake Bluff, Ill.-based economic analysis firm.

In June 2008, Moebs says bank overdrafts accumulated $36.8 billion in revenues for financial institutions. But by June 2011, overdrafts had fallen to $30.8 billion.

Banks aimed to make up lost overdraft revenue by adding fees to ATM transactions, checking and savings accounts, and cutting debit and credit card rewards programs. Consumers should not expect banks to curb their account fees or add perks to card rewards programs just because overdraft fees are rising.

Don't expect banks to rein in overdrafts, either, even though Congress and consumer advocacy groups are watching closely, Moebs says.

"It is important to notice this ... is playing out against the backdrop of increased scrutiny of overdrafts by the government and consumer advocates," explains Michael Moebs , economist and CEO of Moebs Services. "Despite regulation and legislation, such as 2008's Truth in Savings, 2010's Reg E opt-in requirements and the 2011 overdraft guidelines issued by the FDIC, consumers' use of overdrafts shows no indication of going away."

Moebs also reports that the median cost of a bank overdraft rose by $1, to $28 per overdraft -- still way lower than what so many saw on bank statements back in 2008 and 2009.

Geography counts, too. The Moebs data says bank consumers in Green Bay, Wis., paid, on average, $8 per checking account overdraft, while consumers in Gainesville, Fla., were socked with overdraft fees as high as $45.

Most banks stick customers with overdraft fees of between $20 and $29 (51% of all U.S. banks, Moebs says). But 43% are also in the $30 to $39 range.

The data suggests that consumers have more power than they think if they shop around. "Price diversity allows the consumer to opt for a low price overdraft service with a financial institution which has a safety net approach, as opposed to choosing a more expensive approach at a depository whose policy is to treat overdrafts as penalties," Moebs says.

More on personal finance:

401(k) industry gets fat while savers' accounts remain lean

What would you give up to buy your dream home?

What to do before Fido's vet bill hits $16,000

--By Brian O'Connell

Follow TheStreet on Twitter and become a fan on Facebook.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.05 -1.20%
FB $118.47 0.89%
GOOG $695.70 0.48%
TSLA $228.50 -1.60%
YHOO $37.45 4.00%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs