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If you are like most, you just hate being hit with overdraft bank fees. But the banks love it.
America’s biggest three banks pulled in more than a whopping $1 billion in overdraft fees alone… for the year so far. JPMorgan Chase, Bank of America, and Wells Fargo actually earned more than $1.1 billion on overdraft fees in the first three months of the year. So by year’s end, they will rack up a pretty penny in fees charged to customers.
“If the fee collection pace keeps up, the big three banks are on track bring in $4.5 billion in overdraft charges by the end of this year. That works out to about $20 for every American adult,” reports CNN.
Even though this seems like a huge amount, overdraft fees account for less than six percent of non-interest revenue at the Big Three Banks, according to an analysis by SNL Financial.
The government had cracked down on unscrupulous bank fees, and banks aren’t allowed to charge customers overdraft fees when they use an ATM to get cash unless the customer chooses or “opts in” to get the cash despite the fee. But banks still do charge a fee if a customer’s balance goes negative due to a check being cashed or an automatic payment going through and there aren’t sufficient funds to cover it. But the bank is only supposed to cover such debits if you have requested the overdraft service.
However, according to a 2014 Pew study more than half of the people who had overdrawn their checking accounts in the past year did not recall agreeing to the overdraft service. Typically, the overdraft fee is $35 per overdraft.
Currently, the Consumer Financial Protection Bureau is scrutinizing overdraft fees, especially when someone is charged multiple fees a day.
Not only are overdraft fess big business for the major banks, they are a lifeline for many small ones. For example, Woodforest National Bank and First National Bank Texas both rack up more than 40 percent of their of non-interest revenue from overdraft charges, according to SNL Financial.
“These banks are highly reliant on these charges,” says Tyler Hall, a senior bank analyst at SNL Financial. “It just points out that’s their business model.” The median is below 8 percent.
The nearly 600 U.S. banks that had to disclose their overdraft fees made a little more than $2.5 billion in total from consumers who had overdrawn their accounts in January, February or March.
