Overdraft fees reach 7-year high

Revenue collected by financial institutions from overdrawn checking accounts hit a seven-year high last year.

Consumers paid $33.3 billion in overdraft fees last year, a 2.6 percent increase from 2015. It’s the largest amount collected since a record $37.1 billion in 2009, according to a report released this week from Moebs $ervices, an economic

research company based near Chicago.

Credit unions collected a record $6.2 billion, a 5.1 percent increase from previous high set in 2015. The report found only one year in the past 10 when overdraft revenue collected by credit unions fell.

The increase for credit unions come as those institutions attract more members from big banks who want to take advantage of free checking accounts, said Mike Moebs, the company’s CEO and economist. Also, the median charge for an overdraft at a credit union rose last year.

Outside of credit unions, overdraft fees are up because of an 1 percentage point increase in overdrafts last year to 1.1 billion, or

about three per household, and a slight increase in the number of accounts at banks and thrifts, he said.

Credit unions nationally and statewide raised their fees about a dollar last year, the report said.

The median overdraft fee charged by an Ohio credit union increased by a dollar last year to $30. The median fee charged by an Ohio bank held steady at $32. Nationally, the bank median overdraft fee remained the same at $30 and credit unions boosted their fees by a dollar to a median price of $29.

Moebs thinks that overdraft fees might be reaching a peak.

“At $30 median, we have seen a max. I don’t think it’s going to get higher,” Moebs said.

This year’s survey found about a third of the financial institutions surveyed actually decreased overdraft

fees, he said.

“We have never seen that many decrease that price,” he said.

In the Washington, D.C. area and four states median overdraft fees actually fell, he said.

Local financial and credit counselor Richard Korn of the Westerville Area Resource Ministry, which runs workshops on credit and budgeting, advises clients to seek refunds on overdraft fees, especially if they’ve been a long-time customers.

“When it happens, even if it’s just one, (I tell them) to talk the appropriate people at the institution and fight for a refund,” Korn said.

Moebs said he advises consumers to look for community banks or credit unions with free checking accounts and the lowest overdraft fees. Smaller banks often charge less for overdrafts than bigger banks.

During the past few years, some banks have been making changes in overdraft policies to the benefit of consumers.

Huntington Bancshares, for example, gives consumers 24 hours to cover an overdraft before imposing a fee. Some banks have stopped imposing fees when accounts are overdrawn by just a few dollars.

Moebs said some banks actually see overdraft fees go up when they make consumer-friendly changes to overdrafts because they can attract more customers. At the same time, those changes help consumers.

“Whoever takes the friendly approach makes more money,” he said. “So everybody wins.”