Overdraft Fees Tick Higher at CUs, New Survey Finds

Banks and credit unions increased their overdraft fees in 2018, according to a new survey by financial institutions analytics company Moebs Services.

The median overdraft fee was $30 at credit unions and $32 at banks in 2018, representing a $1 increase at credit unions and a $2 increase at banks. The overall national median for depository institutions remained at $30, which is the same as during the Great Recession, the study noted. But the rise for credit unions and banks in 2018 was still notable.

“This is the first time in 19 years banks and CUs increased the OD price at the same time,” Moebs Services Director of Research and Clients J.V. Proesel said.

Among cities of at least two million people, San Diego, San Francisco, Portland, Los Angeles and Boston had the lowest average overdraft fees, at $28, $28.75, $29.54, $29.81 and $29.92, respectively.

“San Diego is a city dominated by the Navy and credit unions. CUs tend to offer the lowest OD price where they dominate a market, like San Diego,” the Lake Forest, Ill.-based company noted.

Miami, Phoenix, Tampa, Baltimore and Atlanta were the highest-priced cities for overdraft, with average fees of $34.48, $33.78, $33.75, $33.56 and $33.12, respectively.

“Miami has regained the title of highest OD price city after having lost the distinction to nearby Tampa in 2017. Miami has been the highest priced city for almost every year in the third millennium,” the study said.

Kansas, Minnesota, Wisconsin, Oregon and California were the states with the lowest-priced states for overdraft, with average fees of $28.22, $29.24, $29.52, $29.60 and $29.66, respectively.

“Kansas truly stands out, because Kansas has a $1.02 difference with the next lowest,” Proesel said. “This is very unusual and signals a lot of competition within the state for OD services.”

Overdraft fees will be around for a long time, the study added.

“Overdrafts will not go away, because daily 15% to 25% of Americans face financial turmoil in their lives,” Proesel said. “Congress may try to legislate ODs, regulators may try to subjugate ODs, but the American who lives day-to-day relies on overdrafts for their financial fate.”

The study also found that markets with the lowest overdraft pricing had depositories that produced high overdraft revenues, and cities with high overdraft prices tended to lack depositories that generated top fee revenue. This suggested that overdrafts have become more elastic, according to the study.

“To have highly satisfied users, to keep Congress at bay and to increase net revenue, the overdraft price needs to decrease to less than $20,” Proesel added.