A new study by the Consumer Financial Protection Bureau (CFPB) found that overdraft fees are costing bank customers on average $225 every year. These overdraft charges occur when the client overdraws their checking account and the financial institution covers the transaction rather than denying it.
Each of the overdraft charges depend on the bank. The average amount on these fees can be as low as $147 and can skyrocket to $298. These fees account for close to two-thirds on consumer checking account fee revenue.
“Consumers need to be able to anticipate and avoid unnecessary fees on their checking accounts,” CFPB Director Richard Cordray said in a statement. “But we are concerned that some overdraft practices may increase consumer costs beyond reasonable expectations.”
In 2010, the Federal Reserve imposed a new rule that requires financial institutions to take customers out of the overdraft program unless the clients voluntarily sign up for the program. Opt-in rates can vary between 10 percent and 40 percent.
Most individuals who decide to take part in overdraft protection do so to avoid important payments, such as rent or utility bills, from being rejected and then risk facing higher costs.