LAKE FOREST, Ill.—Both banks and credit unions hiked their overdraft fees during 2018—but banks dinged their customers a little more.
The latest Moebs $ervices Overdraft Study shows banks increased their median overdraft price by $2 in 2018, while credit unions hiked charges by $1.
The report also shows which cities have the highest and lowest overdraft fees.
“This is the first time in 19 years banks and CUs increased the OD price at the same time,” noted J.V. Proesel, director of research and clients at Moebs Services.
Banks Vs. Credit Unions
The Moebs OD Survey shows the national OD price stayed the same at $30, while banks increased their median price to $32 and CUs increased their price to $30. Proesel said the national median OD price of $30 has not changed since the Great Recession.
The survey covered 2,947 depositories, statistically derived from 10,946 depositories, in December 2018, said Proesel.
“Cities show how overdrafts are portrayed throughout the U.S. The average OD price is used in comparing cities to show market distinction. All cities with a population of two million or more are in the analysis,” he said.
A Navy Town And…
San Diego has the lowest priced overdrafts, the report shows.
“San Diego is a city dominated by the U.S. Navy and credit unions. CUs tend to offer the lowest OD price where they dominate a market, like San Diego.” Proesel said.
Miami has regained the title of home to the highest overdraft prices in the U.S. after having lost the dubious distinction to Tampa in 2017, Proesel noted, pointing out Miami typically claims the title every year.
“States give a view of overdrafts in multiple markets from large to small cities as well as suburban and rural areas,” explained Proesel. “The average OD price provides an accurate feature for comparison of states.”
Trio in the Midwest
Three Midwest states (see chart) took the top three spots for lowest OD price, yet not one of these states has a city in the top low-priced cities.
“Kansas truly stands out, because Kansas has a $1.02 difference with the next lowest city—this is very unusual and signals a lot of competition within the state for financial services,” Proesel said.
Proesel said the study indicates overdrafts are an essential element in the day-to-day financial livese of at least 40 million Amercians.
“Overdrafts will not go away because, daily, 15% to 25% of Americans face financial turmoil in their lives,“ said Proesel. “Congress may try to legislate ODs, regulators may try to subjugate ODs, but the American who lives day to day relies on overdrafts for their financial fate.”
Other Findings
The Moebs Overdraft Study finds markets with the lowest overdraft price have high OD revenue producing depositories. Conversely, high OD price cities and states often do not have top fee revenue generating depositores.
“There is value for a financial institution to provide a low cost overdraft service,” Proesel said. “Overall, the price of overdrafts is now elastic. To have highly satisfied users, to keep Congress at bay, and to increase net revenue, the overdraft price needs to decrease to less than $20.”