This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
TheStreet Open House

Bank Overdraft Fees Are Higher Than Overdrafts

NEW YORK (TheStreet) -- Uncle Sam, in the form of the Consumer Financial Protection Bureau, has taken a long look at bank overdraft fees and doesn't like what he sees.

Specifically, the CFPB has found that bank overdraft fees linked to debit cards "typically exceeded the amount of the overdraft itself."

Banks charge $34 on average for debit card overdraft fees, but the typical card amount that trip-wired the overdraft was $23, meanings banks get an extra $11 to settle the score with customers.

Read More: What You're Paying For Financial Fees -- and How To Avoid Them

"Adding insult to injury, consumers get hit even harder when banks reorder transactions to trip consumers into paying higher fees and charge additional fees each day an account is overdrawn," the CFPB says.

The agency is asking Congress and the White House for a stronger say on overdraft fees, including the ability to "ban or limit" excessive bank fees that they say plague customers.

More from the report:

  • Overdrafts are most of the vast amount of total checking account fees penalizing consumers. "For opted-in consumers, overdraft and NSF fees account for about 75% of their total checking account fees and average over $250 per year."
  • Most overdraft fees are paid by a small fraction of bank customers. The CFPB says 8% of customers incur nearly 75% of all overdraft fees.
  • Age matters with overdraft fees, as the 18-to-25 demographic triggers more than 10 overdrafts per year. Americans 62 and older represent just 2.8% of all overdraft fees.
  • Banking consumers are quick to make good on their overdrawn accounts, with more than 50% becoming positive within three days and 76% within one week.

The CFPB is talking up the issue in Washington, and that might not be good news for the banking industry, which earns $16.7 billion annually on these fees, according to ResponsibleLending.org.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link 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

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs