Overdraft Fee Revenue in the U.S. Falls to $31.6 Billion in 2011
March 15 2012 - 1:13PM
Business Wire
Depositories received $31.6 billion in overdraft fee revenue in
2011, a decline of 4.5 percent from 2010. Analyst had expected less
than $30 billion. These figures reflect the findings of a February
2012 survey of 2,273 banks and credit unions completed by Moebs
$ervices, an independent economic research firm. In addition to the
survey, Moebs also analyzed more than 12,000 reports looking at
service charge income in the banking industry, and found that banks
and credit unions enjoyed an overall rise in revenue in 2011. The
Moebs study found that the national median price for an overdraft
fee increased to $29, up from $27.50 in 2010. According to Michael
Moebs, CEO of Moebs Services, financial institutions increased the
prices of overdrafts to cover anticipated costs brought on by the
heightened regulatory environment of the FDIC and the
implementation of Dodd Frank Act.
The Overdraft Landscape In 2011
After peaking at $37.1 Billion in 2009, financial institutions
have lost $5.5B, or 14.8 percent, in overdraft fee revenue over the
past two years. The median national price has increased by 16
percent to $4 in 3 years. The frequency with which consumers
overdrew their checking accounts in 2011 also saw a decline. “The
average number of overdrafts per account, per year, has fallen from
a peak of 10.5 in the 3rd quarter of 2008 by 29.5 percent, to 7.4
almost three years later,” said Moebs. “The numbers indicate a fall
off in volume, a rise in prices, and a loss of revenue, yet the
overall market appears to have bottomed out. Amazingly, given all
of the polar forces at play in the overdraft market -- volume,
price, revenue, a slumping economy, high unemployment, regulator
restraint by FDIC, and legislation by Congress -- the overdraft
market is rising like the mythical phoenix and coming back,” noted
Moebs. “It appears that the American consumer is saying they want
overdrafts, but they want them as a reasonably priced safety net
overdraft, and NOT an old fashion high penalty priced
overdraft.”
Year
Revenue(Billions)
NationalMedianPrice
AverageODs
PerAccount
2011 $31.6 $29.00 7.4 2010 $33.1
$27.50 8.2 2009 $37.1 $26.00 9.8 2008
$35.4 $25.00 9.8 2007 $34.6
$25.00 9.7
Source: Moebs $ervices Analysis &Surveys
and FDIC, NCUA, OCC & Federal Reserve
The Price To Overdraw Continues To Change
Almost one third, or 29.3 percent of all financial institutions,
changed the amount they charge customers who overdraw their
accounts. Of those who changed, 14.6 percent lowered their price,
by an average $4 to $25. Main Street banks and credit unions with
assets less than $100 Million, charge customers a price of $25 per
overdraft.
Mega banks, with assets greater than $50 Billion, charged
customers a median price of $33.50 per overdraft. As a whole, all
banks were at $30, and all credit unions were at $25.
“More and more banks and credit unions are lowering the price of
overdrafts,” points out Moebs. “This decision bodes well for these
institutions as they try to reclaim lost market share to payday
lenders, who only charge consumers a median price of $17.50. The
closer financial institutions get to payday lenders, the more
consumers will bank with Main Street institutions, and rely less on
Payday lenders and the mega banks during this difficult economy,”
remarks Mr. Moebs.
About Moebs $ervices
Since 1983, Moebs Services has been collecting primary
empirical data about financial institutions’ services, pricing,
operating expenses and financial condition and analyzing the data
in a counter intuitive manner, which provides solutions that make
sense. For more info please visit
www.moebs.com