Most consumers understand the consequences of returned payments and want their bank to pay important transactions -- even if it results in an overdraft. That's assuming, however, the same fee will be charged regardless of whether the transaction is paid.
That's according to a new study of overdraft payment services by the Independent Community Bankers of America, or ICBA, a trade group in Washington, D.C. The study was based on a survey of 3,000 consumers representing a random sampling of the U.S. banking population, according to ICBA.
Slightly more than 85 percent of those surveyed said they wanted their financial institution to pay at least one important transaction, such as a mortgage, rent, car loan or credit card payment or utility bill, regardless of the overdraft.
That preference wasn't due to ignorance of how these programs operate. Rather, consumers who incur overdrafts were found to be among the most knowledgeable about alternative services, yet they still preferred the overdraft program to other options, the study found.
Overdraft fees at the 14 largest U.S. banks -- a category that doesn't include community banks -- range from $33 to $37 with $35 being typical, according to a recent survey by the Consumer Federation of America, a nonprofit consumer advocacy group in Washington, D.C.
The ICBA survey also found that most consumers avoided overdrafts, frequent account monitoring didn't deter overdrafts by those who incurred them, and consumers who used overdraft services were more likely to take out payday loans. Nearly 20 percent of those who'd paid an overdraft fee in the past 12 months had taken out a payday loan as well.
Viveca Ware, ICBA senior vice president of regulatory policy, said in an ICBA statement that banks keeping their customers informed of overdraft services was "in everyone's best interest."
Consumers can avoid overdraft charges by opting out of bank overdraft programs, keeping a cash cushion in the checking account, not setting up automatic withdrawals, and linking the checking account to a savings account or credit line.
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