Have You Ever Overdrafted?
42Checking accounts are the most widely used financial product in the United States. But as Pew found, consumers often are in the dark about their bank’s debit card overdraft policies—including the size of a typical overdraft fee, opt-in requirements, transaction reordering, and overdraft options.
A 2014 Pew survey found three in four consumers agree overdrafts should be more closely regulated. Pew’s consumer banking project took to the streets and interviewed people about their checking accounts and experiences with bank overdraft practices, and found consumers want more rules—and oversight—to regulate this product.
Visit http://www.pewtrusts.org/overdraft to learn more.
** TRANSCRIPT **
[Checking accounts are the most widely used financial product in the U.S.]
[Nine out of 10 households have at least one checking account.]
[Overdraft fees occur when consumers spend or withdraw more money than is in their checking account.]
[The bank then usually charges a costly penalty fee for covering the transaction.]
[We decided to ask some people about their checking accounts.]
[How long have you had a checking account?]
WOMAN: Um, I’ve had a checking account for 6 years.
MAN: Approximately 30 years.
WOMAN: Without aging me, 23 years.
[Have you ever had a debit card overdraft?]
MAN: I have overdrawn my account using a debit card.
WOMAN: Yes I have, quite a few times, overdrawn my account.
WOMAN: I have never overdrawn my account—my mom would kill me.
[Do you know how much the typical bank charges for an overdraft fee?]
WOMAN: I think the typical charge is about $25 for an overdraft fee.
MAN: I think I was hit with $20.
[The typical overdraft fee is $35.]
MAN: It’s approximately $25.
MAN: About $35.
[Are you signed up with your bank’s overdraft program?]
WOMAN: I am signed up for my bank’s overdraft program—but I believe it was like automatically done, so.
[Actually, consumers must opt in to debit card overdraft.]
MAN: No, I have not.
WOMAN: Yes, I have signed up for the overdraft program.
[Most overdrafters pay fees between $30 and $100 on transactions of $50 or less.]
WOMAN: Um, to pay overdraft fees for small transactions I think is a bit unfair. Um, I know that some banks actually waive overdraft fees for certain charges.
MAN: Uh, I think that’s pretty high—a lot of banks are doing that though.
MAN: I think it’s ridiculous based on the amount of the overdraft—if it’s that minimal the fee should be like a percentage of whatever the actual overdraft is.
[Banks can legally rearrange the order of transactions, resulting in more overdraft fees.]
WOMAN: No, I didn’t know that banks could alter the order of our transactions. That’s pretty crazy.
MAN: I did not know that.
WOMAN: That’s upsetting. I’m gonna have to pay closer attention, I guess.
[Would you prefer that your transaction be declined instead of paying an overdraft fee?]
WOMAN: Uh yeah, I think I’d rather be declined especially if it’s like a really small charge.
WOMAN: Yeah, I mean if I had the option to, I think decline would be better so I don’t have to pay that extra fee.
[Are more rules and oversight needed to protect consumers from overdraft fees?]
WOMAN: Yes, I do. I do think there should be some more rules—and probably, um, more obvious disclosures from the banks.
MAN: I think banks have enough income from a variety of sources not to rely on overdraft fees.
WOMAN: I do believe that there should be more oversight. We do need some type of regulation to keep it where the customers aren’t being put in situations where they’re having to pay back so much money.
[Pew’s survey found 3 in 4 consumers agree overdrafts should be more closely regulated.]
[Want to learn more? Visit pewtrusts.org/overdraft.]
**