80 Percent of Consumers Paid No Overdraft Fees In Past Year: ABA Survey

Eighty percent of consumers have not paid an overdraft fee in the past 12 months, according to a recent survey by the American Bankers Association.

The annual survey of 1,000 consumers was conducted for the ABA by Ipsos-Reid on July 11-13, 2008.  The list of questions asked was designed to take a snapshot of current consumer trends.

"The survey shows that most consumers are smart consumers, who manage their accounts well," said Nessa Feddis, ABA senior federal counsel and retail banking expert.

Of the 20 percent who have paid an overdraft fee in the past 12 months, they provided the following responses when asked how many:

• 27 percent said one;
• 25 percent said two; 
• 11 percent said three; 
• 8  percent said four; 
• 5 percent said five; 
• 13 percent said six to 10; and 
• 9 percent said more than 10.

Most consumers (73 percent) said their bank covered the check or debit payment that caused the overdraft fee, while 27 percent said their bank did not.  Of those who did pay an overdraft fee in the past 12 months, the vast majority (85 percent) said they were glad the payment was covered while 14 percent said they wished the bank had refused the payment. 

"Consumers have made it clear that they want banks to pay their overdrafts so they can avoid the inconvenience, embarrassment and potential costs of having a payment or transaction rejected.  At the same time, it’s important for bank customers to know there are numerous ways to avoid paying overdraft fees,” Feddis said.

ABA offers the following tips to avoid overdraft fees:

1. Use direct deposit for your paycheck.  You will have access to your paycheck immediately.
2. Keep track of your balance and transactions and don’t forget about automatic payments.  Today, you can track balances and transactions online, by phone, or at the ATM, 24 hours a day.  Some banks even offer mobile banking so you can check your balance on your cell phone.  However, keep in mind that those balances will not reflect transactions you authorized that have not yet reached and been processed by your bank.
3. Keep a “pad” or cushion of money in your checking account just to be safe. 
4. Link your checking account to a savings account or credit card.  These are usually less expensive alternatives, but remember:  credit cards have to be paid back on time  and money is not automatically put back into your savings account when you deposit more money into your checking account.
5. Ask your bank for an overdraft line of credit that will cover you if you overdraw your account.  Just be sure to pay it back as soon as you get the bill.
6. Find out if your bank will allow you to “opt-out” of overdraft protection.  However, ABA surveys show that most consumers prefer having the security of knowing their transactions will be covered even if there is a fee.
7. See if your bank offers automatic notification when your balance drops below a certain level.  You may be able to get notified by text message or email.
8. Change banks if your bank doesn’t offer the services you would like, or charges too much for overdrafts.  There are literally thousands of banks competing for your business.

The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation’s banking industry and strengthen America’s economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry’s $13.3 trillion in assets and employ over 2 million men and women.