Photo: Pew Charitable Trusts
A pair of reports released today show just how little banks have slackened their reliance on overdraft fee revenue, in spite of increased scrutiny from regulators. Overdraft fees pumped nearly $30 billion into big banks’ pockets in 2011 alone, according to the latest report from the Pew Safe Checking in the Electronic Age Project, and banks are still doing a poor job of communicating their policies to customers.
“Consumers are expected to wade through long, confusing documents and may be subject to steep, unexpected fees to access their own checking accounts, the cornerstone of household financial management,” said project director, Susan Weinstock.
In the chart at right, Pew analysed exactly how banks tell customers about their fee structures. The blue squares are most transparent (available online), while the yellow, orange and red areas illustrate important fees that are buried in user agreements or only available by visiting the bank in person.
While Pew outlined the lack of transparency with fees, the Consumer Federation of America’s 2012 Big Bank Survey analysed 14 of the largest U.S. Banks to see just how much their fees have changed in recent months.
The outlook isn’t bright. The CFA found banks still charge anywhere from $99 to $370 in daily overdraft charges alone, and at least one bank allows unlimited daily fees.
Although the median overdraft fee hasn’t budged from $35, the real damage is caused by so-called “sustained” fees banks charge on unpaid overdraft charges.
The fees work like compounding interest, charging consumers another chunk of change on top of overdraft fees if they leave them unpaid for certain periods of time. For example, SunTrust customers are charged $36 on the seventh day an overdraft fee goes unpaid; Bank of America charges another $35 fee on the fifth day; and JP Morgan follows suit, charging $15 after five days.
The two banks that charge the highest overdraft fees of all ($37) also unsurprisingly have the harshest sustained fee structures. RBS Citizens charges customers a $6.99 daily fee on the fourth through 13th day an overdraft goes unpaid.
Fifth Third Bank charges an even unfriendlier $8/day sustained overdraft fee, though the CFA says the bank will cut the fee at the end of June.
Other banks are changing their fee structures as well. U.S. Bank will start charging only $15 for overdrafts under $15 and continue to charge $35 for overdrafts over that amount.
Although all but one bank, HSBC, limit the number of overdraft fees charged in a 24-hour period, some banks as many as six (Regions, SunTrust) and 10 consecutive charges (Fifth Third Bank).
See the charts below for a full breakdown of big bank’s overdraft fee structures: