Overdraft

The need for new rules

Checking accounts are the most widely used financial product in the country. Yet poorly regulated bank overdraft practices continue to cause consumers to unknowingly incur multiple costly fees for a single transaction. Pew is promoting new rules to make overdraft programs safer and more transparent.

Credit management
Credit management
Article

Millions Use Bank Overdrafts as Credit

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Article

More than 39 million American adults incurred at least one fee for overdrawing their bank account or having insufficient funds in the past 12 months, according to an analysis of survey data by The Pew Charitable Trusts. Most of these consumers, known as overdrafters, view bank overdraft programs as a way to ensure that payments will go through if checking account balances are low. But almost a third—representing more than 12 million people—said doing so is a way to borrow when short on cash.

credit card
credit card
Article

Customers Can Avoid Overdraft Fees, but Most Don’t Know How

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Article

Each year banks make billions of dollars in overdraft fees, and more than three-quarters of this revenue is generated from just a small fraction of checking accounts, less than 10 percent. Survey research by The Pew Charitable Trusts shows that overdraft programs are not meeting the needs of most consumers for two key reasons. First, most of those who overdraw their accounts do not know that they can easily avoid these fees, and, second, many of the overdrafters use these programs for credit, even though regulators say they are not supposed to be used in this way.

Overdraft
Overdraft
Issue Brief

Overdraft Does Not Meet the Needs of Most Consumers

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Issue Brief

Overdraft programs are often marketed as a service that banks provide to cover occasional budgeting errors, but in practice they are not well understood by consumers and often fail to meet their needs. The Consumer Financial Protection Bureau requires banks to receive affirmative consent (opt in) from customers before providing overdraft coverage for ATM withdrawals and one-time debit transactions, such as point-of-sale purchases.

Checks and Balances
Checks and Balances
Data Visualization

Bank Overdraft Policies Matter

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Data Visualization

Bank Overdraft Policies Matter

This interactive tool follows three typical people—Mike, Sarah, and Jen—as they go about their day. They are all responsible with money, but their budgets are a little tight. We will explore how, depending on where they bank, their experiences with overdraft fees can differ dramatically, and why it pays to know your institution's policies and practices. Click on a character to start.

Additional Resources

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Agenda for America

A collection of resources to help federal, state, and local decision-makers set an achievable agenda for all Americans

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Data-driven policymaking is not just a tool for finding new solutions for emerging challenges, it makes government more effective and better able to serve the public interest. In the coming months, President Joe Biden and the 117th Congress will tackle a number of environmental, health, public safety, and fiscal and economic issues—nearly all of them complicated by the COVID-19 pandemic. To help solve specific, systemic problems in a nonpartisan fashion, Pew has compiled a series of briefings and recommendations based on our research, technical assistance, and advocacy work across America.

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Lightbulbs

States of Innovation

Data-driven state policy innovations across America

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Data-driven policymaking is not just a tool for finding new solutions for difficult challenges. When states serve their traditional role as laboratories of innovation, they increase the American people’s confidence that the government they choose—no matter the size—can be effective, responsive, and in the public interest.

Heavy overdrafters use a large proportion of income to pay their fees
Heavy overdrafters use a large proportion of income to pay their fees
Fact Sheet

Heavy Overdrafters

A financial profile

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Fact Sheet

Pew urges the CFPB to write new rules to ensure that overdraft programs are safe and designed only for infrequent and accidental occurrences.

Overdrawn
Overdrawn
Report

Overdrawn: Consumer Experiences with Overdraft

Survey shows checking account holders still confused, unhappy with practices and fees

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Report

This report finds that many consumers still express confusion and disapproval about bank overdraft practices and the rules surrounding them. Despite federal requirements that consumers must agree to debit card overdraft coverage before any fees are charged or services are provided, Pew’s survey finds that more than half of those who incurred a debit card overdraft penalty fee do not believe they ever opted in to the service. This report includes policy recommendations for the Consumer Financial Protection Bureau to make overdraft programs safer and more transparent.