When American consumers make the mistake of overdrafting their bank accounts, they are lining the pockets of the big banks with even more profit. It is bad enough to drain your bank account, but to get penalized with a monetary charge because you don’t have money is absolutely frustrating. How much money do you think the big banks are making from these fees? You may want to sit down for this one – the country’s 628 largest banks made about $11.16 billion dollars from non-sufficient fund and overdraft fees in 2015. This was the first year that banks had to share this information with the public, and it is an eye-opening statistic that we all need to be aware of.
These types of fees contributed about 8 percent to total bank net incomes and added up to over 65 percent of all the consumer fees that banks charge.
Non-sufficient fund (NSF) and overdraft fees are both charges that happen if you write a check, use your debit card or transfer money online without having adequate funds in your bank account. The end result of these types of fees is different, though. Overdraft fees are charged when the bank covers the charges for you, while the NSF fee occurs when you don’t have overdraft protection and the transaction winds up being declined.
The overdraft fees can really be expensive. The median cost around the country for these fees is $34, but if someone keeps using the account for a few days several fees could be charged by the bank. Additionally, the majority of overdraft fees from debit card transactions happen for purchases that total less than $25. That’s right, you could have to pay a $34 overdraft fee if you went a few bucks over on a purchase without being aware that your account was running low.
As if the fees were not bad enough, there are issues with the level of transparency surrounding these fees. Back in 2010 federal bank reform laws were enacted that prevent banks from enrolling consumers into their overdraft programs without the consumer agreeing to it. But studies have found that more than half of consumers don’t remember opting into overdraft fees in the years between 2010 and 2014. As concerns about these types of issues increases, the Consumer Financial Protection Bureau has released new reports related to overdraft fees over the past few years.
Banks are required to send quarterly financial statements to the FFIEC, and have been for some time, however, they were not required to break down the listing of their revenue sources prior to last year. This information is all a matter of public record. Data sent from the banks with at least $1 billion in assets are the institutions required to report this type of data.
Avoid Paying Overdraft Fees to your Bank
We all need to save every dollar that we can. That means that we have to be aware of what is going on with our finances. Take time to monitor your account balances regularly, so you know how much money you have in your account. Do not opt into any overdraft programs, and if you already are opted in, you may want to talk to your bank about opting out. There is no doubt that banks are going to continue to make money from consumers – that is just what they do – however, you don’t have to make them more profitable at your own expense. Stay on top of your money and do what you have to in order to avoid paying NSF and overdraft fees to your bank!