Overdraft Prices Unchanged, But Changing
Many Financial Institutions in Some Cities & States are Reducing OD Prices
Lake Forest, IL (March 7, 2017) In the past 6 months, 11.0% of all Depositories changed their Overdraft Price. “The National Overdraft Price has remained at $30 for the past 5 years, signaling a new trend may be emerging,” states Michael Moebs, Economist & CEO of Moebs $ervices who did a survey of over 3,800 financial institutions in January, 2017. “Although the National Price has remained constant, there are significant price changes taking place at many depositories. Of those who adjusted their price 34.9% decreased it, which is the largest amount decreasing their price in the past 5 years.”
WHO IS LEADING THE CHANGE?
Moebs Overdraft Study shows that the 34.9% who decreased their price is led by Banks and Thrifts, who historically have set the price precedence in the overdraft market place. The high number of Banks & Thrifts decreasing their price indicates the industry may have reached a cap at $30 per item.
Credit Unions (CUs), who currently on average charge $1 less for an overdraft than Banks and Thrifts, seem to be reaching the $30 cap with the majority of CUs still raising their price, and only 25.9% of those CUs who made a price change decreasing their price.
“This many Banks & Thrifts decreasing their price is unprecedented,” exclaims Moebs. “It implies that many Depositories are beginning to shift strategies from pricing overdrafts as a penalty fee.”
OVERDRAFT DEMOGRAPHICS CHANGING GEOGRAPHICALLY
Some cities and states have changed their OD price significantly the Moebs Study shows.
The largest increase was in New York City at $3 per item, or 10% price increase; followed by Chicago with a $1 increase. In contrast Washington DC lowered the price $2.25 or 7%. Five of the largest US cities increased their Overdraft Price an average of $0.50 per item which is statistically significant change for a service that has not changed its overall price in 5 years.
Six states changed their price. Depositories in Kansas and New York State increased their prices considerably. More important 4 states lowered their price. Two states, Pennsylvania and West Virginia had many financial institutions lower their price meaningfully.
There was also a regional increase with the West increasing their price $1 per item. Leading this price expansion was the Credit Unions in the West who also increased their price $1 per item, while the Banks and Thrifts remained constant.
“It is rare to see states and especially a region change OD price when the industries are not
changing, let alone this many,” notes Moebs. “This points out a more open market for overdrafts and related services is emerging.”
WHAT IS HAPPENING IN OVERDRAFTS IN 2017 AND BEHIND?
Overall, the National Overdraft Price has remained constant for the past 5 years at $30 per item. Behind the consistent price there are price changes happening at the depositories. Credit Unions appear to be on track to increase OD prices in 2017, matching the Banks and Thrifts with a median price of $30 per item. “A new trend seems to be taking place. Many Banks & Thrifts are beginning to price ODs as a safety net, or what is better for the consumer. This signals that prices could start to decrease in the near future. The $30 OD price is just about maxed out, creating a reverse trend from what we are accustomed to seeing – changing the game in Overdrafts,” states Moebs.
Written By: m.moebs
Date Posted: 7/22/2017
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