PaymentsJournal
SUBSCRIBE
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
No Result
View All Result

Overdrafts Pile Up as Opt-In Pays Off, But Were Consumers Misled?

Mercator Advisory Group by Mercator Advisory Group
May 4, 2011
in Analysts Coverage
0
0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

Last summer, when the August deadline for opting-in for automatic debit card overdraft protection was required, banks were aggressively reaching out to their customers to encourage them to opt-in for the coverage. Many banks also were encouraging customers to sign up for mobile banking and use account alerts as a way to know their balances at all times to avoid fees.

Success rates for these promotions are debatable. The Center for Responsible Lending says 33% of account holders opted-in to overdraft coverage. The ABA says 46% of consumers opted in. Moebs put the number between 60% and 80%, with a median of about 75%.

Whatever the case, it’s clear that some significant segment of the population feels they need overdraft protection. And it seems to be paying off. Moebs predicts overdrafts will hit $38 billion this year, an all-time high for the industry.

A study by the Center for Responsible Lending contends that banks mislead consumers and used scare tactics to retain the lucrative overdraft revenue. Another study from Pew Charitable Trusts concluded that overdraft fees were disproportionate to the amount of the overdraft. According to Moebs:

44.3% of banks and credit unions made some type of change to their overdraft program in response to opt-in requirements. 55.7% did nothing. One in five increased prices to offset revenues lost from those opting out. 6.5% actually decreased prices for overdraft protection. Moebs said its data shows institutions that decreased overdraft fees either maintained or increased their overall revenue in the past year.

BofA eliminated overdraft fees on debit cards last summer because customers said they would rather have debit card purchases declined than pay a fee.

Moebs study revealed that almost all of those who averaged 10 or more overdrafts in a year opted in. JP Morgan Chase said that of those who frequently overdraw their accounts 53% have chosen to sign up for the overdraft coverage.

Overdraft Fees (in Billions)

overdraft fees

Graphic from The Financial Brand

For more information read the article in The Financial Brand: http://thefinancialbrand.com/18262/opt-in-marketing-increases-overdraft-feerevenue/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+thefinancialbrand+%28The+Financial+Brand%29

For more opinion from the Center for Responsible lending: http://www.responsiblelending.org/overdraft-loans/policy-legislation/regulators/banks-misleading-marketing.html

Click here for related Mercator content: “Retail DDA Fee Structures: An Examination of Top Debit Issuers’ Retail Checking Account Models”

http://www.mercatoradvisorygroup.com/index.php?doc=Debit&action=view_item&id=574&catid=4

0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

    Analyst Coverage, Payments Data, and News Delivered Daily

    Sign up for the PaymentsJournal Newsletter to get exclusive insight and data from Mercator Advisory Group analysts and industry professionals.

    Must Reads

    online fraud

    Understanding the Cost of Online Fraud and How to Prevent It

    March 27, 2023
    live shopping, ebay

    Q&A: eBay Exec on Live Shopping and the Future of Payments

    March 24, 2023
    AI and Biometrics in Regulatory Compliance in Finance

    The Importance of AI and Biometrics in Regulatory Compliance in Finance

    March 23, 2023
    Everyone Benefits from the Real-Time Payment Networks  

    Everyone Benefits from the Real-Time Payment Networks  

    March 22, 2023
    commercial payments

    Optimizing Commercial Payments in the Digital Age

    March 21, 2023
    cross-border payments

    Cross-Border Payments: Fighting
    E-Commerce Fraud Using Data

    March 20, 2023
    fraud, ChatGPT-4

    How to Fight Fraud While Still Enabling a Great Online Customer Experience

    March 17, 2023
    RTP

    Financial Institutions Without an RTP Strategy Risk Being Left Behind

    March 16, 2023

    Linkedin-in Twitter

    Advertise With Us | About Us | Terms of Use | Privacy Policy | Subscribe
    ©2023 PaymentsJournal.com

    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    Menu
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    • Industry Opinions
    • Recent News
    • Resources
    Menu
    • Industry Opinions
    • Recent News
    • Resources
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Industry Opinions
    • Faster Payments
    • News
    • Jobs
    • Events
    No Result
    View All Result

      Register to download the PayPal report