Ever since the economic crisis hit, consumers have become more and more conscious of their finances. This is very understandable, considering that a slight financial mistake can easily be exacerbated by the weak economy thereby making it a serious problem.
Thus, this particular trend of consumers getting money smart and doing their best to avoid fees has become more commonplace nowadays. Another one which was recently studied by the American Bankers Association is the determination of consumers to avoid overdraft fees.
Recently, the American Bankers Association (ABA) ran its annual survey. According to the survey, 82% of consumers constantly checked on their balances to avoid overspending and avoided anything that could wind up as a hefty overdraft fee in the long run. The survey also shows that consumers are also learning fast from their mistakes. Of the total number of consumers charged with overdraft fees, 36% were able to get hit at most only once during the last year. Unfortunately, the study also shows that 35% of consumers were charged with four or more overdraft fees. Of that 35%, 11% were charged with 6 to 10 overdraft fees. Considering that each overdraft fee could cost $29.00, the total cost of the fee could be as high as $290.00.
According to Nessa Feddis, ABA senior federal counsel and retail expert, “Anyone’s bank account can fall short from time to time, but overdraft fees are 100% avoidable”. She elaborated that, “Just like a parking ticket, they’re meant to be a deterrent”.
The trend of financial responsibility among consumers is not an isolated event, According to the Federal Reserve, consumers have been avoiding debt for the 6th straight month in July. Borrowing for everything but real estate dropped to a record 10.4%. What these figures show is that credit cards are becoming less profitable forcredit card companies, particularly for companies relying on fees such as overdraft fees. This is alarming considering that, Moebs Services Inc recently claimed in a survey that 45% of banks and other financial institutions acknowledged that a large part of their income came from fees such as the overdraft fee. In fact, banks and financial institutions are looking to collect around $38.5 billion this year from overdraft fees alone.
Consumers can easily avoid overdraft fees. ABA actually has a number of suggestions for consumers such as keeping track constantly of balances and transactions. This also includes automatic payments. Nowadays, balance and transaction tracking can be easily done through the internet or the phone. It can also be checked through any ATM. Mobile banking offers also allow consumers to check their balances through their cell phone. Consumers can also check if their bank has an automatic notification service for when their balance drops to a certain level and apply for such a service.