An update to a study from earlier this year found that while the average price tag on overdraft fees has increased, banks still lost money year over year. But the amount of money banks actually lost is now lower than first reported, pointing to a possible shift to profitability in 2012.

Back in January, we first reported bank research firm Moebs Services’ findings that financial institutions generated $29.5 billion in revenue from overdraft fees in 2011 — a decline of $3.6 billion compared to 2010. On March 9, Moebs updated their findings, reporting that banks actually earned $31.6 billion in overdraft fees, cutting the year-over-year drop in half to 4.5 percent from 10.1 percent.

Moebs also updated its estimate of the median fee charged by banks to $28, down from the earlier estimate of $30.

Large banks (those that carry $50 billion or more in assets) have a much higher median fee of $35, according to Moebs. The findings for large banks falls in line with MyBankTracker’s bank fee study, which studied common fees for the ten largest U.S. banks.

Our study of overdraft fees shows:

  • The average overdraft fee is $33.70 at the top 10 U.S. banks
  • Bank of America and Wells Fargo both charge $35
  • Chase and Citi charge $34
  • The average overdraft fee is $23.40

Regulations and fees

In July 2010, President Obama signed the the Dodd-Frank Act into law. Among the provisions of the law was a measure designed to prevent banks from locking consumers into fees when signing up for a new deposit account. Today, adding overdraft to your account is an opt-in only experience.

Even with the new law, some 100 million Americans made the decision to opt-in for overdraft by September of 2011. Moebs’ recent survey of 1 million checking accounts nationwide found that the consumer opt-in rate has grown to 75% and continues to increase.

Consumers’ willingness to opt in suggests that there is a fee level at which people are willing to pay to avoid being rejected at the cash register. The search for this “sweet spot” may be driving the move by some community banks and credit unions to lower their fees in hopes of attracting new consumers.

If your not sure if you are currently opted-in to overdraft, we recommend contacting your bank or visiting a local branch to confirm. At that point, weigh the pros and cons of keeping or adding the fee based on your spending habits and the cost to being charged the fee. But, consumers are always advised to take steps to avoid incurring overdraft fees.

Alexander Matjanec

Alexander Matjanec is a Co-Founder of MyBanktracker, who specializes in banking trends and consumer financial products.