NSF and Overdraft National Norms

Bretton Woods, Inc. today published their annual study of NSF (non-sufficient funds) and ODP (Overdraft Protection) fees for banks and credit unions. They have published this report annually since 1998.

Their 2008 Fee Analysis of Bank and Credit Union Non-Sufficient Funds and Overdraft Protection Programs, finds significant increases in fee income and overdraft activity. Other key findings include:

Fee Income
  • NSF/ODP fees have risen significantly from 2005 to 2008, with the average fee now at $28.95 per transaction, an increase of more than 7% in the past three years.
  • The number of debits presented against insufficient funds soared to 1.28 billion (checks and electronic), an increase of 16.3%.
  • Bank and credit union income from non-sufficient funds (NSF) and overdraft program (ODP) fees exceeded $37 billion in 2008.
  • Californians generate the most NSF/ODP fee income, $4.07 billion, compared to the lowest state total of $73 million in Alaska.

NSF/ODP Cost per Household
  • The national annual NSF cost per household with checking accounts is approximately $368.
  • Active households (defined as the 20.2 million households with bank or credit union accounts who write the majority of NSF items) pay $1,472 in annual NSF fees.

NSF/ODP Processing
  • Banks pay debits in order from highest dollar amount first to low dollar based on transaction type.
  • Banks and credit unions typically pay teller cash items, then POS (Point of Sale)/Debit card and in-house Automated Teller Machine items before paper check items.
  • These processing strategies generally increases fee income while reducing the risk of the bank absorbing losses on NSF items paid by the bank while transferring risk to third parties (third party ATM, Automated Clearing House, and online/bill payments).

NSF/ODP Transactions
  • The average United States household with a banking account incurs 12.7 NSF fees per year.
  • The median transaction size at banks with automatic overdraft was $36.
  • The median transaction size of an ATM withdrawal that resulted in an NSF transaction was $60
  • The median transaction size of a check that resulted in an NSF transaction was $66.
  • The median transaction size of a POS/debit that resulted in an NSF transaction was $20.
  • Bank and credit union data used in Bretton Woods’ modeling determined 1.28 billion separate check and electronic NSF items.
  • Much of the transaction increase is due to the rising popularity of the debit card, transaction from which are typically smaller dollar amounts and, as such, are usually posted after larger dollar items – resulting in more transactions presented against insufficient funds.
  • Almost half (48.8 percent) of all reported NSF transactions took place at POS/debit (41.0 percent) and ATM (7.8 percent) terminals.
  • Checks accounted for 30.2 percent of the reported NSF transactions.
  • Assuming a $27 overdraft fee (the survey median), a customer repaying a $20 POS/debit overdraft in two weeks would incur an APR of 3,520%; a customer repaying a $60 ATM overdraft in two weeks would incur an APR of 1,173%; and a customer repaying a $66 check overdraft in two weeks would incur an APR of 1,067%. More rapid repayment of the overdraft amount results in higher APRs, and slower repayment results in lower APRs.

For a full copy of the report, visit
http://bretton-woods.com/media/Bretton$20Woods$2C$20Inc.$202008$20NSF-ODP$20Fee$20Analysis$2C$2001-09-2009.pdf

Posted by Mark Rodrigues at 1/13/2009 2:55 PM
Categories: Checking Accounts, Debit Card
 

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  • 4/30/2010 5:49 AM Charles Zake wrote:
    Thank you very much indeed enabling me to have insight into such fascinating and enthalling subject-matter.
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