Since its peak at $37.1 billion in 2009, overdraft revenue has fallen for six straight quarters, ending at $30.1 billion for the first quarter of 2011. According to Moebs Services, an economic research firm, overdraft revenue at the end of the second quarter of 2011 is up more than $700 million at both banks and credit unions.
Additionally, the average number of overdrafts per household increased during the same period.
"From our study of usage, behavior and prices of over 2,500 depositories and a million checking accounts, Americans not only want ODs but are using overdrafts with increased frequency," said Mike Moebs, CEO and economist at Moebs Services.
Consumer behavior
ODs occur when a consumer unintentionally or intentionally allows their checking account to go to a negative balance. According to Moebs, two thirds of the time ODs are unintentional, due to a lack of keeping track of transactions, or an unusual financial transaction such as an unexpected medical bill or a car repair.
"Forty dollars is the median negative balance," Moebs said. "The other 26 percent of consumer checking account holders do, however, intentionally overdraw their checking account."
The Moebs study found that 34 million Americans utilize ODs to fill a shortfall of funds and 19 million of these go to payday lenders.
"Those Americans that rely on overdrafts and advance payday loans, do not have the FICO score to qualify for a line of credit or credit card," Moebs said. "By creating unintended consequences, such as predatory lending from loan sharks, adding limits to overdraft volume or price will do more harm than good."
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