Study finds bank overdraft fees increased 35 percent

10.07.09
By Lewis Green

It seems that credit card debt is not the only financial problem facing Americans as a new report finds that even those who are trying to avoid using credit by making purchases with debit cards are increasingly being hit with fees from their banks.

The study released this week from the Center for Responsible Lending (CRL) found that the income American banks and credit unions received from overdraft fees increased 35 percent between 2006 and 2008. For American consumers, that meant almost $24 billion in overdraft fees in 2008.

According to the report, the so-called "courtesy" overdrafts - which allow consumers to make small purchases even if they don't have the funds - make up the majority of banks' overdraft charges. Although purchases that would exceed a customer's account balance were often denied in the past, the "courtesy" overdraft means consumers are now paying more in fees than they do for a number of other expenses, according to CRL senior researcher Leslie Parrish.

"Banks and credit unions have become so sophisticated in driving up overdrafts that Americans now pay more in overdraft fees every year than they do for books, cereal, or fresh vegetables," she said. "These billions of dollars drained from consumers each year represent lost opportunities for families to save for a rainy day or buy necessary goods and services that could help spark the economy."

But consumers may be in for good news when it comes to these fees. Some of the major banks, including Bank of America and JPMorgan Chase, have announced changes to their overdraft policies which could help cut down on the amount Americans pay in fees each year.

If that isn't enough, Connecticut Senator Chris Dodd recently said he was drafting legislation to limit the amount banks can charge for these fees.

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Comsumers are handing over more money because of overdraft fees