Small Banks Charge Big Overdrafts, Too

Turns out, it’s not only big U.S. banks that are charging their customers fees. According to a Pew Charitable Trusts study, small banks are guilty as well.

According to a report by The New York Times, Pew Charitable Trusts published a new report this week using secret shoppers to get information on 45 smaller financial institutions around the country to look at how much they charge in overdraft fees. The findings: Some smaller banks charge more fees than their larger brethren. Pew Charitable Trusts found small banks typically charge overdraft fees of $32, which is right below the average charge of $35 levied by the bigger banks. All of the banks let customers rack up $90 or a more a day in fees, and many permit the accumulation of even higher daily totals in terms of fees. On the positive side, the smaller banks weren’t as likely to change the order of customers’ debits from the largest to the smallest, which often results in more overdraft fees.

Earlier in the week, Pew Charitable Trusts reported that, based on new research, 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.