Overdraft fees are on the rise, according to a report issued by the Consumer Federation of America. After hitting a two-year-long price plateau, the biggest banks in the United States are bringing overdraft prices higher, just slightly. And worse still for consumers, they aren’t even being forthcoming about the fees, according to another study by The Pew Charitable Trusts. Banks, it would appear, are still keen on generating revenue through fees, meaning consumers must remain vigilant — not only to avoid fees, but also to develop better financial habits.

According to the CFA report, which came out Thursday, the median overdraft fee of $35 has actually held steady since 2010. However, two banks, U.S. Bank and Fifth Third Bank, are raising overdraft fees in June, and five banks (Fifth Third, PNC, RBS Citizens, SunTrust and U.S. Bank) charge tiered fees, which vary based on the number of times a customer overdraws on his/her account over the course of a year — rising as overdrafts pile up, and effectively punishing poorest customers.

Most banks charge $35 per overdraft, with little variation, but new tiered fees make it difficult to identify who is being generous with consumers and who is gouging consumers. RBS Citizens, for example, charges just $22 for the first overdraft — the lowest overdraft fee for an overdraft of any amount (U.S. Bank charges just $10, but only for overdrafts under $20) — but they charge $37 for the second overdraft, which is more than many others. Furthermore, RBS Citizens charges $6.99 a day for the 4th-13th days that the overdrawn amount is not paid back, bringing its effective APR on a $100 overdraft to a staggering 2779%. Two-thirds of the banks in the survey charge some sort of “sustained overdraft fee,” according to the CFA.

For a $100 overdraft, Citibank, by contrast, has an 884% effective APR on its $34, one-time overdraft fee. That’s it.

But Citibank, along with Bank of America® and HSBC, doesn’t allow customers to overdraft when making purchases with debit cards, anyway — the transactions are instead declined. Consumer advocates love this, because no one would willingly take out a 3000% APR short-term loan, no matter how many times banks insist that overdraft protection is a service. It’s clear that overdraft fees are a way of gouging vulnerable customers, and it’s a healthy stream of revenue for banks that are suffering due to a low-rate environment along with the rest of us.

Looking at the tables that CFA put together explaining the different banks’ policies is downright dizzying — they’re all over the place. But at least these banks make an effort to clarify to consumers what fees they might incur, right?

Not everywhere, according to The Pew Charitable Trusts’ study, Still Risky: An Update on the Safety and Transparency of Checking Accounts, which was released on Friday. Pew examined the fee disclosures at the 12 largest banks and 12 largest credit unions in the nation, and scored them each on their transparency. The median bank checking account disclosure statements is shorter than in the past, but “still cumbersome at 69 pages.” Credit unions median length is 31 pages — shorter, but still quite long, and presumably packed with boilerplate legalese that no one in their right mind would actually sit down and read. Generally speaking, Pew found that “financial institutions do not summarize important policies and fee information in a uniform, concise, and easy-to-understand format that allows customer to compare account terms and conditions.”

The most transparent institutions included many reviled, bigger institutions, including the four biggest banks: Bank of America®, Citibank, Wells Fargo and Chase. BB&T is one of the most opaque when it comes to fees; many fee disclosures are only available by visiting branches. Capital One, HSBC and Regions Bank also have some disclosure that are difficult for consumers to access. Credit unions, generally speaking, are far more transparent than banks about fees, according to Pew’s research.

Pew advocates for a standard disclosure box for checking accounts, so that customers can both understand and compare fees between different banking products. It even developed a model disclosure box, which is one-page long, and which has since been adopted by Chase Bank and TD Bank. Instead of burying fees in pages and pages of boilerplate, Pew made a simple table that breaks fees and terms out into four categories: Account opening and usage; overdraft options for consumers with debit cards; processing policies; and dispute resolution.

As things stand, consumers must still be vigilant about their checking relationships. Not only should you check your balance daily, you should also familiarize yourself with your bank’s possibly-inscrutable overdraft policies before you sign up. And if you don’t like their terms, there are plenty of other banks and credit unions that would love to have you as a customer.

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  • effectively punishing poorest customers”

    I’m sorry, but what else should they do, allow the payment to clear even if there is not enough in the specific account to cover it? It has nothing to do with rich or poor. it has everything to do with responsibility. It’s not the banks’ responsibility to float them the money if they are about to bounce a payment. It’s absurd to think that they should. What people should be talking about more often is the lack of personal accountability in this country when it comes to credit and banking: how people misuse the tools they are given only to cry and point fingers every which way but where it belongs–pointing at themselves.

    • That’s a fair point, and that’s why I said “effectively”, to draw the distinction, but perhaps I could have been clearer. I don’t believe banks are going out of their way to punish poor customers, but that’s how it plays out.

      You make good points about a lack of financial responsibility in this country. But $35 for an overdraft is a bit excessive, especially when a bank could just as easily decline the transaction. Overdraft protection is billed as a form of insurance for consumers, but really it’s a great source of revenue from irresponsible and/or poor customers. Look at the nonchronological ordering of debits and tell me otherwise.

      • The ordering of the debts I will grant you as a bank shortcoming, but still have to maintain my stance that if people were responsible the overdraft issue would be moot. I understand that mistake do occur and nobody is perfect, but if you look at some of the people hit the hardest, it’s impossible to see their stories and wonder if they even belong having free access to money.

        Just as an aside, what would it matter if the consumer’s bank is charging the fee for floating the money or if t was rejected and they received a late payment/returned check fee from the party they were attempting to pay to cover their own expense? Either way they are going to have to pay someone for their error.

        • Bob

          When it comes to checks I agree with you, but who uses checks anymore? The issue is with electronic payments. I reject this blanket notion that this is just a matter of accountability. The days of having an orderly check register have gone the way of the cassette tape. We have debit/credit purchases, transfers, recurring payments and deposits coming in all the time. If I go to Starbucks and buy a $3.50 latte I do not want to pay $35 simply because I don’t have an up-to-the-second accounting in my paper check register of all this activity. Even if I had that, the reordering the bank does makes it impossible for me to predict. I’m not asking the bank to float me an interest-free loan. I simply want them to decline the transaction. I’m here online looking into this issue today because we just got a letter from Citibank. The letter is written as if they were providing us a great new service. What they are doing is going back to this policy of overdraft fees as a revenue stream. They are being “friendly” by allowing up to $5 overdraft without a penalty, so maybe my latte is covered (as long as I don’t get a muffin too). But this is no longer an “overdraft protection service” that I can opt out of. Its an NSF fee that they will charge me simply presenting my atm card for a purchase when my balance is too low.
          This may not be designed to target low income consumers. But because these consumers have lower balances they require constant vigilance. When the overdrafts do occur it usually snowballs. I know a few people in this situation and they try very hard to keep up with their current balance but all it takes is one slip and they can suddenly owe the bank what to them is a significant amount of money. Because our society requires a banking relationship, they have little recourse but to pay the bank’s userous fees.