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Households with Access to Payday Loans

Fared Better in the Face of Rising ODP and NSF Fees in 2009

Bretton Woods, Inc. has been analyzing non-sufficient funds and overdraft protection fees on bank products since 1998. The recently completed analysis of those in fees in 2009 found that instances and costs of overdraft fees went up last year. Further, the study found that, in states where “alternative” financial services, like payday loans, were available to consumers, households tended to pay less in fees.

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The study found that:

The cost of overdraft and NSF fees to American consumers increased in 2009, profiting banks and credit unions.

  • “Bank and credit union income from non-sufficient funds (NSF) and overdraft (OD) fees exceed $38 billion, which is an increase of $3.5 billion (10 percent) over 2008 and an increase of 27 percent since 2005.”

  • “The average NSF/OD price increased to an all-time high of $29.58 from $28.95 in 2008.”

  • “The average United States household with a bank account incurs 12.7 NSF/OD fees in 2009, up from 11.9 NSF/OD fees in 2008 – a 7 percent increase.”

  • “The national annual NSF/OD cost per household with checking accounts increased from $343 in 2008 to $376 in 2009, a 10 percent increase.”

Credit alternatives, like payday loans, spare consumers overdraft and NSF fees.

  • “In states that permit payday loans, households with checking accounts pay up to 13% less in overdraft and insufficient fund fees than in states that prohibit payday loans”

  • “It is Bretton Woods’ opinion that the difference among banks, credit unions and alternative financial services providers comes down to a choice based on product availability, cost, convenience and customer service.”

The increase in fees in 2009 is part of a pattern of increasing overdraft and NSF fees.

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