Don't begrudge the banks their overdraft fees. Poor things, it's all that's keeping them afloat

08/11/2009 10:30 am EST


Jim Jubak

Founder and Editor,

I'm actually not kidding.

Without overdraft fees, 45% of banks and credit unions wouldn't have made money in 2008, according to research from Moeb Services.

No wonder banks are jacking up their fees as fast as they can. This is the first recession since 1969 where bank fees have gone up.

And up and up and up. The average ATM fee is now $1.97, for example. That's up 11% from 2008.

The Big Daddy of fees, though, is the overdraft charge. Overdraft fees will bring in $38.5 billion in 2009, Moebs Services projects. Overdraft charges account for 75% of all bank fees.

And it's not the little banks that are jacking up fees the fastest. The average overdraft charge at all banks rose to $26 this year from $25 in 2008. But the average overdraft fee at banks with more than $50 billion in assets--you know the Citigroups, Bank of Americas, and Wells Fargos of the world, is $33.

If you're an investor in the financial stocks, you know what's wrong with this picture. In the wake of the financial crisis banks are rediscovering the value of the money that comes in their doors as good old, plain vanilla deposits. For one thing it doesn't run out the door quite as quickly in a crisis as the hot money banks raise by selling very short-term commercial paper. For another, the deposit market never completely shuts down as the commercial paper market did at tyhe height of the crisis. Banks who depended on that method of raising cash found the spigot shut down tight.

But you don't attract lots of deposits by treating your customers like dumb chickens just waiting to be plucked. There's a lot of rhetoric out there now about this bank or that bank wanting to re-invent themselves as a deposit driven, consumer-friendly bank.

At most banks, especially at most big banks, it's just talk.

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