During the latest quarter, consumer overdrafts declined 2.8% to seven overdrafts per checking account annually at financial institutions nationally, making it the lowest consumer usage of overdrafts since 1999, but overdraft revenue hit $31.3 billion annually due to higher overdraft fees, according to the latest quarterly study by Moebs Services.

“Overdraft volume decreased as consumers reacted to uncertain economic times, so America's financial institutions reacted by increasing price,” said Michael Moebs, economist and CEO at the research firm in Lake Bluff, Ill.

Financial institutions have raised the median price of overdraft fees by 3.4% since 2011, with credit unions leading the way, the report noted.

“For almost two years, since the third quarter of 2011, the median price nationally was $29 with the banks and thrifts higher at $30 and credit unions at $25,” the report stated. “Over the past two years, credit unions have increased their fees from $25 in 2011, to $27 in 2012 and now $28 in 2013.”

Moebs said several factors have prompted consumers to take a closer look at overdraft fees, which impacted the study.

“With the tax increase in Social Security on Jan. 1, stemming from government automatic budget increases, consumers' net pay was reduced,” he said. “It takes three to six months for economic fiscal changes to fully show up in the marketplace, and the cut in the average pay hit consumers' pocketbooks in the second quarter of this year.

“Reduced overdraft volume reflects the belt tightening by the consumer,” he continued. “The back-to-school season shows parents were conservative in school supply purchases, and recently released individual income data reflects very small increases so far this year. The automatic budget cuts, or sequester, have created uncertainty for consumers. Keeping the checkbook balanced and avoiding overdrafts reflect these economic trends.”

The report forecasts that focus on overdrafts will continue. An estimated 30% to 40% of consumers are illiquid and in need of cash at any given time, according to Moebs' “Small Cash Market,” study of March, 2012.

Many consumers also are confused and concerned about overdraft fees and practices, according to a report by the Safe Checking Project of the Pew Charitable Trusts.

“The Pew report emphasizes consumers' need for more information to make decisions on their checking account, while the CFPB appears focused on price enforcement,” Moebs stated. “Regulators, trade groups, legislators, advocates and financial institutions will continue to address these challenges.”

Instant Insights /

Moebs: Overdraft Revenue Increases Resulting From Higher Fees

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