Banks on Track to Make $38 Billion in Overdraft Fees

Banks are making loads of money, just not in banking.

Overdraft fees accounted for more than three-quarters of service fees charged on customer deposits, he said.
The most cash-strapped customers are the hardest hit by such fees, with 90 per cent of overdraft revenues coming from 10 per cent of the 130m checking accounts in the US. Regular use of overdrafts is most common among consumers with low credit scores, Moebs discovered.
Banks say that the fees compensate for the risk they incur when they pay on behalf of customers who do not have enough money in their accounts. “Overdraft fees are there for a reason, we take on a lot of risk,” a senior banker said. “It’s a service to our customers, they want us to pay their overdrafts.”
The highest overdraft fees were charged by the largest banks, said Mr Moebs. At banks with assets greater than $50bn – a group including Citigroup, Bank of America, JPMorgan Chase and Wells Fargo – the median overdraft fee is set at $33.
At BofA, a customer overdrawn by as little as $6 could trigger a $35 penalty. If the customer does not realise they have a negative balance and continue spending, they could incur that fee as many as 10 times in a single day, for a total of $350. Failing to repay the overdraft within a few days results in an additional $35 penalty.

So what do banks pay when they overdraft?

Posted by on August 10th, 2009 at 9:14 am


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