Consumers are once again paying more in overdraft fees despite regulations designed to protect them from these charges.
Last year, consumers paid $32 billion in overdraft fees, a $400 million jump from 2011 according to a recent study by Moebs Services. This 1.3 percent increase came almost entirely from a greater number of overdrafts rather than an increase in the price of the fee.
Overdraft volume during the first quarter of 2012 actually fell to an eleven year low, but the number of overdraft transactions during the last nine months of the year rose 4.4 percent.
In July 2010, the Federal Reserve required banks to receive permission from each checking account customer before the bank provided overdraft protection for ATM and debit card transactions. If consumers did not "opt in" for this coverage, then debit card transactions made at store level or withdrawals from an ATM machine for an amount greater than the account's balance would be denied and no overdraft fee could be charged.
But banks have stepped up the marketing of such services and appear to be quite effective at convincing consumers they need this coverage.
According to the Moebs study, 38 million checking accounts--approximately 26 percent--are frequent overdraft users. Somewhat surprising is that 20 million consumers use payday lenders for their overdrafts while 18 million use banks or credit unions.
This seems to be due to the affordability of an overdraft with a payday lender. The median charge for a $100 advance is $16 with a payday lender, a decrease from $17.50 in 2011. The average overdraft fee for a bank is $30, and $27 for a credit union.