Overdraft fees on the rise

A few years after public and regulatory outcry forced banks to reverse course on overdraft fee hikes, lenders are lifting them again, with economic research firm Moebs Services putting the median fee at $30 in 2013, up $1 from 2012, and $4 from 2009. "Banks have a revenue gap that needs to be recouped," says Bankrate's Greg McBride.

Call it an unintended consequence of new regulation. The Fed in 2010 stopped banks from automatically charging overdraft fees on debit-card and ATM transactions, and among Dodd-Frank's rules is an amendment lowering debit-card fees charged to merchants. Overdraft fees are where the money is in checking, with KBW estimating banks generated $31.9B of overdraft revenue in 2013, well off from a peak of $37.1B in 2009.

Among those hiking: U.S. Bancorp (USB) boosted its fee to $36 from $35 last August and Boston Private Bank (BPFH -0.3%) to $30 from $25.

Banks like Wells Fargo (WFC -0.1%) and JPMorgan (JPM -0.4%) offer overdraft-protection programs where money is transferred from another account to cover the shortfall. The fee at Wells is $12.50 for each day it's used; Chase charges $10.


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Comments (14)
  • rambler1
    , contributor
    Comments (1070) | Send Message
    Moral of the story. Stay on top of your check book.
    2 Apr 2014, 03:26 PM Reply Like
  • Clayton Rulli
    , contributor
    Comments (3433) | Send Message
    yeah well we will see how quick the banks give depositors their interest rates back as rates rise. Right now I think i get .000001% or something
    2 Apr 2014, 03:28 PM Reply Like
  • rvshaw
    , contributor
    Comments (118) | Send Message
    Haha! So, there is a tax on stupidity.
    2 Apr 2014, 03:30 PM Reply Like
  • financeminister
    , contributor
    Comments (1230) | Send Message
    Yes, I have to agree, this is the tax for being stupid. I have to say, anyone who has to pay overdraft fees more than once probably shouldn't be managing bank accounts.


    1. When you start a checking account, you should decline any offer for overdraft facilities. These days there are options to even avail of automated alerts to your phone or email on certain charges. The sooner you dispute, the better.


    2. You should always use a credit card for all purchases whereever possible. This will reduce fraud whereas debit cards can have money withdrawn online and are harder to dispute and get refunded for over credit cards.


    3. Using a credit card builds up your credit history (provided you pay on time)


    4. I can't for the life of me understand why more and more Americans don't see how they can leverage banks and their credit cards to their benefit instead of always being the sucker and whining about it. Banks and their credit cards have some of the most awesome deals out there.


    Last year, I was paid over $550 from Chase just to start checking and savings accounts.


    It gets better with credit cards... I mean, you're getting convenience and a free accounts payable credit for 30 days. But that's not it. I've applied for all those bonus airline mile credit cards and me and my wife have flown around $5000 worth of airline tickets over the last two years (I even went to India for a vacation this year)
    Next month, I will be getting the benefit of around 10 to 12 free flights along with the additional benefit of being able to carry along my wife as a companion for all my flights for free till the end of 2015 on this particular airline.


    All this thanks to the greedy banks! If more and more people knew how to use the banks and credit to their advantage, they would love it. And it's no rocket science! Even the creator of WhatsApp was about to call off the deal with Facebook because he had already booked his flight for the conference announcing the deal in Europe through airline miles and wasn't willing to cancel the flight as he wouldn't have got his miles back! 13 billion dollar deal guys and even he's frugal with his miles!
    2 Apr 2014, 04:02 PM Reply Like
  • rvshaw
    , contributor
    Comments (118) | Send Message
    I agree. Everything goes on the credit card, which gets paid in full every month. I did a little better, I got over $1,000 back. I'm sure the credit card industry doesn't like people like you and I. We get money back and pay no interest or fees.
    2 Apr 2014, 04:09 PM Reply Like
  • financeminister
    , contributor
    Comments (1230) | Send Message
    Oh banks hate us alright... they got names for us in their offices... "dead beats"....




    It's kind'a like a corporation's version of welfare... those that rack up credit card debt and pay interest and fines (or "tax") are subsidizing the rest of us free riders.


    2 Apr 2014, 04:27 PM Reply Like
  • Total Return Investor
    , contributor
    Comments (1388) | Send Message
    Granted we "no balance" people are not first class customers on the good ship Visa, but I doubt we are free riders. Don't the merchants' swipe fees we generate at least cover their costs to keep us on board? My hunch is that, if Visa didn't want me riding "no balance" they would throw me overboard, or at least charge me an annual fee that would be progressively waived as I started carrying a balance. These companies aren't dumb, and they aren't altruistic.
    2 Apr 2014, 10:34 PM Reply Like
  • Pazr
    , contributor
    Comments (5) | Send Message
    Kind'a like Obamaism in reverse ! I like that. Now that's the NEW CHANGE.
    3 Apr 2014, 12:59 AM Reply Like
  • financeminister
    , contributor
    Comments (1230) | Send Message
    Visa and Master Card are payment processors and they get swipe fees irrespective of whether a user defaults or not. AMEX and Discover are banks + payment processors.


    We're "dead beats" to the banks as they put it since we're not revolvers and are infact worse - loss leaders. It gets worse when we don't just pay the balance but grab all their cards just for their bonus miles which are good for anywhere from one to two or even more airline round trips. The banks buy hundreds of millions of airline miles from the airline companies at a discount and offer them as a bonus for signing up a credit card with them.


    For example, I went to India for free this year instead of paying $1600 thanks to the "greedy" Chase bank - I applied for a United Mileage Plus Chase card which had a promotional 50,000 miles offer in Dec 2012 giving me 53,000 miles. Last year I applied for Chase Sapphire Preferred Credit card which gave me 50,000 bonus miles + 5000 for adding my wife and around 3000 from minimum spend (you get 2 points for eating at restaurants). Both cards waive their first year annual fee (85$ per year)


    I just need 80,000 United miles to fly on an airlines within the star alliance group. So with two cards, I already had around 110,000 miles and just need 80,000 miles for an international flight and still have 30,000 miles for a free domestic roundtrip flight. I used those 80,000 miles and booked a Lufthansa flight to India as United and Lufthansa are part of star alliance and you can use any carrier within the star alliance using United miles. Whenever I apply for myself, I also apply for cards for my wife so she also gets all those miles. So with just two credit cards each for me and my wife, we saved a lot of money. I would have spent $1600 on an international trip to India for myself otherwise. we also used my united miles for a $900 on a domestic trip (we went to Tampa last September for a holiday for flights that cost $450 each weekend rates). Best part is that you get hundreds of miles when you connect your credit card and frequent flyer number and shop at restaurants, stay at hotels or rent cars. We rented a car for one day and got 900 southwest points.


    >>These companies aren't dumb, and they aren't altruistic.


    These companies very well know that we exist but they make so much money from revolvers that we are the price they pay for getting revolvers sign up with them.


    The fact is, we're subsidized by revolvers. If revolvers didn't exist, then banks would be out of business and we wouldn't get our free miles.


    I'm waiting to get my 110,000 southwest miles from the two southwest cards I got a month ago. I should get it next month after I pay this next months credit card bill. That will give me a companion pass valid till the end of 2015 allowing me to tag along my wife for free on all flights. 110,000 southwest miles are good for around 6 round trips free. Transfer miles from other credit cards and I don't know...maybe 10 free flights on southwest? yeah, something like that.


    I need to go to India next year or maybe in 2016... I'm already planning. Citibank has 100000 American AAdvantage executive card which is good for one free international roundtrip (I will use Qatar Airways as American does not fly to india but American and Qatar Airways are part of the One World airline program). I don't really need that card since I already have 55,000 miles from the AAdvantage card I got last year and just need 30,000 more miles for an international trip which I can get by applying for US Airways 50,000 mile card (since American and US airways are in the process of merging and will probably combine their miles program by year end). I will cancel the AAdvantage card and keep the miles before the annual fee kicks in. Lots of options... lots of credit cards. Just pay your bills and rack up miles.


    Thank you you 1% greedy bankers!
    3 Apr 2014, 01:34 AM Reply Like
  • DrP79
    , contributor
    Comments (2529) | Send Message
    It may be unintended by the regulators, but it was highly predictable
    2 Apr 2014, 04:32 PM Reply Like
  • Buyandhold 2012
    , contributor
    Comments (5253) | Send Message
    Banks generated 31.9 billion of overdraft revenue in 2013?


    How is that possible? Don't people know how much money is in their checking accounts?


    I always know exactly the amount of money in my checking account and never write a check unless there is enough money in the checking account to cover it.


    Those who write checks larger than the amount of money in their checking accounts need to go back to school to learn proper money management.
    2 Apr 2014, 09:26 PM Reply Like
  • DrP79
    , contributor
    Comments (2529) | Send Message
    many are using the overdrafts as short term loans
    2 Apr 2014, 10:31 PM Reply Like
  • Jake2992
    , contributor
    Comments (1142) | Send Message
    It's not complicated, just decline overdraft "protection". If you don't have the money in your account, the charge is declined. The entire idea that a bank is protecting me by charging me 30 bucks to cover the 10 cents I went over on my balance is absurd and unethical. Not giving me the option to decline overdraft protection was the problem, that is what Dodd-Frank fixed.


    The banks would go so far as to prioritize purchases so that larger purchases are deducted from your account first, then when you are at zero balance they process the smaller charges and hit you with multiple overdraft charges. Robbery.
    2 Apr 2014, 09:44 PM Reply Like
  • Pazr
    , contributor
    Comments (5) | Send Message
    . "Banks have a revenue gap that needs to be recouped," says Bankrate's Greg McBride.


    Maybe if the Bank CEO's didn't accept those tremendous year end bonuses, the bank would be left with sufficient working capital. Those with any type of account need to be responsible by keeping up with their balance sheet, but a $30 fine/tax?
    These are probably the people who can least afford this too.
    2 Apr 2014, 09:53 PM Reply Like
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