There’s good news for U.S. Bank (Stock Quote: USB) customers — the financial institution will lower its overdraft fees to $10 for overdrafts of less than $20. That’s as low as most big banks will go these days, and it begs the question: will other banks play along?
As far as consumers are concerned, that answer better be “yes.” According to a November 2008 study by the Federal Deposit Insurance Corp, the median bank overdraft fee in 2009 was $27 — with some bank fees reaching $36 per overdraft. The FDIC study revealed some other telling numbers related to bank overdraft penalties:
- Eighty-six percent of banks operated at least one formal overdraft program — either automated, linked accounts, or lines of credit.
- Most banks, 75.1%, automatically enrolled customers in automated overdraft programs, although customers were usually permitted to affirmatively opt out of the program.
- Automated overdraft usage fees assessed by banks ranged from $10 to $38, with a median fee of $27. About one-fourth, 24.6%, of the surveyed banks also assessed penalties on accounts that remained overdrawn in the form of flat fees or interest charged on a percentage basis.
- The (surveyed) banks earned an estimated $1.97 billion in NSF-related fees in 2006, representing 74% of the $2.66 billion in service charges on deposit accounts reported by these banks. Banks operating automated overdraft programs earned $1.77 billion in NSF fees in 2006, accounting for 90% of total NSF-related fee income earned by the entire study population.
- About 12.5% of the banks operating automated overdraft programs received consumer complaints. By comparison, less than 1% of banks offering linked-account programs, and 1.5% of banks offering line-of-credit programs, received negative feedback from their customers.