Overdraft fees are big business for banks in the U.S., with the Pew Charitable Trust finding the top banks charged a combined $11.6 billion in overdraft fees and insufficient fund fees last year.
What’s more, the fees have doubled during the past 30 years. According to a report looking at the results of Pew’s research, one-fifth of banking customers pay 90 percent of those fees, even though the lion’s share earn less than $50,000. Pew also found the fees are the result of very small transactions. Pew found the average debit charge that prompted an average $35 overdraft fee was $24. “The majority of consumers who pay these billions of dollars in overdraft fees are younger and low income,” said Joy Hackenbracht, a research officer with Pew’s consumer banking project, in the report. Nick Bourke, director of consumer finance project at Pew, said the fees impact as much as 40 million people living in the U.S., with some getting hit with fees multiple times in a day. “This is a problem that needs a systematic fix,” Bourke said in the report.
The U.S. isn’t the only country dealing with high bank fees. In July, the U.K.’s Financial Conduct Authority (FCA) said it is looking to help combat the high fees associated with overdrafts. The watchdog’s CEO, Andrew Bailey, said that he would begin reviewing final recommendations on the matter from the Competition and Markets Authority (CMA). According to Reuters, some of the initial recommendations have proposed that banks set their own fee caps for unauthorized overdrafts.