Banks are set to make a record $38.5 billion in overdraft fees, says a new report in the Financial Times, and the bulk of the money is coming from those who can least afford to lose it.
From the Financial Times:
The most cash-strapped customers are the hardest hit by such fees, with 90 per cent of overdraft revenues coming from 10 per cent of the 130m checking accounts in the US. Regular use of overdrafts is most common among consumers with low credit scores, Moebs discovered.
Banks say that the fees compensate for the risk they incur when they pay on behalf of customers who do not have enough money in their accounts. “Overdraft fees are there for a reason, we take on a lot of risk,” a senior banker said. “It’s a service to our customers, they want us to pay their overdrafts.”
We’re not so sure about that last part. Sure, we’re probably biased by the fact that we read heartbreaking emails for a living, but we’ve never had someone write us saying, “Oh thank god Bank of America paid my overdraft and charged me a $35 fee! What would I have done without them?!”