Finance Globe

U.S. financial and economic topics from several finance writers.
3 minutes reading time (524 words)

Most Consumers Paid No Overdraft Fees in Past Year

American consumers have been responsibly managing their checking accounts and keeping the costs of banking to a minimum.

Most bank customers paid no overdraft fees over the past year, according to a report released on Wednesday by the American Bankers Association (ABA).

A survey of 1,000 bank customers found that 77% paid no overdraft fees in the previous twelve months, and 21% paid for one or more overdrafts. 2% of consumers said they weren’t sure.

Of those who had an overdraft, 67% said that their financial institution covered the payment that caused the overdraft, and 30% said that their overdraft was not covered. 3% said they weren’t sure.

Most consumers said they were glad their bank covered the overdraft (69%) compared to those who wished the bank did not cover it (29%). 2% weren’t sure if they preferred their payment to be covered or not.

“The majority of consumers continue to avoid paying overdraft fees despite current economic conditions,” said Nessa Feddis, ABA senior federal counsel and retail banking expert. “This is good news and a sign that most consumers are managing their personal finances well.”

The survey also asked respondents how many overdraft fees they paid. Most consumers who paid an overdraft fee said they had only one (29%) or two (21%) in the past twelve months, but 18% responded that they paid between six and ten overdrafts fees, and 7% paid for more than ten. The survey was conducted for ABA on August 14th and 15th by Ipsos-Reid, an independent market research firm.

“Customers can avoid overdraft fees by keeping track of their balances, keeping extra money in their account as a pad, or by linking checking accounts to savings accounts, credit cards, or overdraft lines of credit,” Feddis said.

ABA also suggests using direct deposit so your paycheck is available immediately, applying for a line-of-credit as a back-up for overdrafts from your checking account, or signing up for text or email alerts if your balance falls below a certain level. If your bank doesn’t offer the kinds of services that you need to help you prevent overdraft, don’t hesitate to shop around for one that does and change banks, the ABA recommended.

But it really all boils down to personal responsiblity. How can we - with a straight face - blame the bank if we mismanage our financial accounts?

If the consumer bounces one check, it can easily lead to many more overdrafts once all the fees are added in. Sometimes the safest thing to do is to completely stop using the checking account and go to all cash until you know that all items have cleared. Once you see the final damage of all the extra fees, you can rebalance your checkbook and start fresh.

Sometimes one check will accrue several bad check fees due to the merchant running the check through more than once. It can cost a pretty penny to get things straightened out, but once you do be sure to be extra vigilant in keeping track of all expenditures from checking; forgetting about even one can lead to a big mess of overdrafts.

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Thursday, 30 March 2023

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