An Overview of Overdraft Fees / By: Piotr Fedczuk

$5 spent on the Metra. An additional $25 for that cool game you just saw. $10 for that box of ice cream. $60 on groceries. A seemingly ordinary day for spending, with charges totaling $100. That is what you would pay if you had $100 in your bank account. But what if you only had $1 in your bank account? What would you pay then? Certain banks have overdraft protection, which lets you complete purchases even if you have insufficient funds in your account. In this case, the bank will lend you that money with a fee for every purchase, ranging from $10 to $45 depending on the bank. So in the above scenario, instead of spending $100, you might have had to pay $280! Keeping a close eye on how much money is in your account and also knowing your budget can help you avoid these fees. However, it may not prevent overdraft fees completely in some cases. “ There always needs to be money in my account, because paying expenses is just a part of my life ,” said Marek Fedczuk, a Chicagoan with a bank account. “ I don’t know how we’d manage costs if we had to worry about overdraft fees. ” Sadly for Marek, it was recently discovered that even when people have enough money to cover their expenses, banks still charged overdraft fees. When the Consumer Financial Protection Bureau (CFPB) investigated Regions Bank, they found even their “ own employees could not explain to customers why they incurred the overdraft fees ” ( CFPB, 2022 ). According to the CFPB, banks generated $15.5 billion from overdraft fees in 2019  ( CFPB, 2021 ). However, as the CFPB more closely monitored these fees, banks started to limit — or even eliminate — overdraft fees. In a 2023 report, the CFPB estimated a revenue decrease of about $5.5 billion  ( CFPB, 2023 ). However, for the overdraft fees that do remain, many continue to impact the most financially insecure Americans. According to the CFPB,  people who pay more than 10 overdraft fees per year make up nearly 75% of all overdraft fees. On average, these frequent overdrafters pay $380 in overdraft fees during the year  ( CFPB, 2022 ). Not only do overdraft fees harm the financially insecure, they also keep people from opening bank accounts. In a nationwide survey conducted by the FDIC, nearly 30% of unbanked households said they did not open a bank account because account fees were too high or unpredictable  ( FDIC, 2021 ). Most reputable financial institutions offer an account that lets you opt out of overdraft protection so that when you try to make a purchase and you do not have enough funds in your account, the purchase will just be denied instead of incurring overdraft fees. However, if you find yourself dealing with exploitative bank practices, file a complaint with the CFPB at www.consumerfinance.gov/complaint . Works Cited:  https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-regions-bank-pay-191-million-for-illegal-surprise-overdraft-fees/ https://www.consumerfinance.gov/about-us/newsroom/prepared-remarks-cfpb-director-rohit-chopra-overdraft-press-call/ https://www.consumerfinance.gov/data-research/research-reports/banks-overdraft-nsf-fee-revenue-declines-significantly-compared-to-pre-pandemic-levels/#:~:text=Third%20quarter%20of%202022%20is,in%20fees%20on%20annual%20basis.&text=Since%20late%202021%2C%20several%20banks,fund%20(NSF)%20fee%20revenue . https://www.fdic.gov/analysis/household-survey/2021execsum.pdf