WASHINGTON-Banks have begun increasing overdraft fees again, according to a new study from the Consumer Federation of America.
Any increase in fees attached to bank checking accounts, especially if it leads to any national media coverage, could mean more such accounts moving to credit unions.Meanwhile, a separate study finds credit union overdraft fees are lower than banks', but also suggests credit unions could do a better job with disclosures.
The CFA reported that after two years of flat fees for overdrafts, a survey of the 14 largest U.S. banks has found those fees again on the rise.
"The two-year period of flat fees coincided with the implementation of a new Federal Reserve Board requirement that banks get affirmative permission from consumers to incur overdraft fees on debit card and ATM overdrafts," the CFA said. "While the typical overdraft fee remains at $35 per transaction, two of the largest banks-U.S. Bank and Fifth Third Bank-have announced changes to their tiered-fee structures that indicate rates are again on the rise," the organization said.
Of the 14 banks surveyed by the CFA, five-Fifth Third, PNC, RBS Citizens, SunTrust and U.S. Bank-charge tiered fees that vary depending on how many overdrafts are incurred in a 12-month period, the Federation stated. Beginning in late June, Fifth Third Bank plans to charge $37 per overdraft after a $25 fee is assessed for an initial overdraft transaction. Currently it charges a $33 fee for the second, third and fourth overdrafts in a 12-month period, according to CFA.
"Big bank overdraft fees for a single transaction are very high, ranging from $33 to $37 at the largest banks," said Jean Ann Fox, director of financial services for CFA. "Consumers can be charged $370 in one day, according to the maximum fee and daily limit fee policies that banks have.
"U.S. Bank said it charges $15 for an overdraft transaction that is $15 or less, and $35 for any overdraft over that amount. Currently it charges $10 if the overdraft is $20 or less, and $33 per item if it is more than $20.
The CFA said it found that nearly two-thirds of those banks in the survey add second or "per-day" fees if customers do not pay the overdrafts immediately. SunTrust, for instance, charges $36 on the seventh day an overdraft remains unpaid, while RBS Citizens charges $6.99 a day on the fourth through 13th day the overdraft is owed. Fifth Third reported it is dropping its sustained overdraft fee that adds $8 per day after the overdraft remains unpaid for three days.
Survey Finds Changes In Transaction Order According to the CFA, three banks--Bank of America, Citibank and HSBC--do not allow customers to incur overdraft fees when using a debit card for purchases. The latter two also prevent overdraft fees triggered at an ATM. The other 11 largest banks encourage their customers to opt-in to pay overdraft fees on very small purchases.
The CFA said the biggest changes its survey found related to the order in which banks processed payments from accounts. As recently as 2010, almost all major banks paid transactions from largest to smallest received (or reserved the right to do so)--a practice which can result in consumers with low balances overdrawing their accounts and paying even more overdraft fees, said CFA.