© Lizardface
The notion behind an overdraft fee - in which a bank customer is charged a penalty for overdrafting his account - is twofold: To incentivize consumers to pay attention to how much money is in their accounts, and to allow the bank to recoup any money it lost by covering the overage. But a new report claims that these fees have become such a profit center for banks that it's now in their interest to push account-holders with low-balance bank accounts toward overdrafting.
According to a newly released white paper [
PDF] from the National Consumer Law Center, banks brought in $29.5 billion in overdraft fees in 2011 alone (a recent study
showed that number increased to $32 billion in 2012). Given that the median fee is now around $35, while the actual cost to the bank for processing the overdraft is anywhere from a few cents to a few dollars, a large portion of those billions is profit.
The NCLC also found that the median debit card overdraft is only $20, while the median amount for all overdrawn transactions is $36. Thus, in many cases, the fee is larger than the amount being overdrafted.
In recent years, a some of the larger banks have made no secret of the fact that the average checking account-holder is not a source of profits, and have tried to institute things like monthly fees for debit cards, a number of which have resulted in public backlash.
