Americans Pay $38 Billion of Bank Overdraft Fees a Year!?

More

From the Financial Times:

US banks stand to collect a record $38.5bn in fees for customer overdrafts this year, with the bulk of the revenue coming from the most financially stretched consumers...

I'm sorry. How is that mathematically possible?


There are 300 million Americans, and, the FT reports, 130 million checking accounts. $38 billion divided into 130 checking accounts puts the average yearly overdraft total at $300 dollars, which is the equivalent of 9 overdraft charges from large banks like Bank of America. How many Americans really overdraft 9 distinct times a year? Moebs Services discovers, however, that one bad day for a consumer can mean gangbusters for the banks:

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.

Banks are defending themselves by saying that overdraft fees are really no worse than parking tickets  -- responsibility requires financial incentives, and so on. But practices like BofA make it quite clear that banks aren't merely using overdraft fees to regulate withdrawals. They're also trying quite clearly and cleverly to wring customers dry for billions of dollars. Bank overdraft fees totaled $11 billion in 1992. Now they're nipping at $40 billion.

I'm sympathetic to the argument that banks have to build capital in down times, but by turning overdrafters into ATM machines and then falling back on the "Hey, we're just trying to encourage responsible checking!" excuse, they're only making the government's point that a consumer financial protection bill is necessary to regulate the banks' relationship with its customers.

Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Get Today's Top Stories in Your Inbox (preview)

Social Security: The Greatest Government Policy of All Time?

It's the most effective anti-poverty program in U.S. history. So why do some people hate it?


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Video

What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.

Video

Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.

Video

Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Business

Just In