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Debit Overdraft Fees Often Exceed Cost of Purchase

The fees that banks charge debit-card users who overdraw their accounts usually cost more than the items being bought. That's the result of a study that the Consumer Financial Protection Bureau released Thursday. Large banks have generally charged a $34 penalty when people overdraw their debit-card accounts, even though most of the purchases involved were for less than $24. And the penalties are charged even though most accounts return to a positive balance within three days, the study found. Banks profit by collecting more than half their checking account income from these fees. The study builds on a 2013 report that found that heavy overdrafters, on average, face $900 in additional costs each year. The new study also found that 75 percent of all overdraft fees come from just 8 percent of bank customers. Richard Hunt, president and CEO of the Consumer Bankers Association, said in a statement that overdraft protection and the resulting fees are optional. Consumers can instead choose to have their transactions denied if they exhaust their accounts.

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-The Associated Press