MADISON, Wis. (11/19/13)--A new study from GoBankingRates.com reveals that a single checking overdraft fee can wipe out a year's worth of deposit interest. But on the bright side, the study also shows credit unions offer higher rates and lower overdraft fees on average than banks.
In its latest study, GoBankingRates.com compared the cost of overdraft fees against 2,781 checking account interest rates today, to determine the real return that depositors can expect to earn.
On the national level, average checking account rates stand at 0.27% annual percentage yield. Credit unions continue to demonstrate their ability to offer depositors higher average checking account returns, with rates at 0.32% APY compared with a 0.26% APY for banks.
Comparing average checking account interest rates with overdraft fees by region, GoBankingRates.com found depositors can expect to lose between 96.67% and 145% of their return on a $10,000 deposit with a single overdraft.
The national median overdraft fee stands at $30 for 2013, according to Moebs Services. Median bank overdraft fees are also $30, while credit unions charge $28 for an overdraft.
But just one overdraft can easily reverse customers' returns. The GoBankingRates.com study revealed that one overdraft in the course of a year equals 111.11% of a depositor's annual return, meaning that one misstep can not only jeopardize interest earnings, but also cut into principal deposits.
The Consumer Financial Protection Bureau (CFPB) issued a report on financial institution overdraft protection plans and continues to gather information about the variety of programs offered and how they affect consumers' ability to anticipate and control their costs for financial services.
For credit unions, the Credit Union National Association points out, overdraft protection and 'courtesy pay' are designed to be a service to their consumer members, who have asked that they have continued access to such programs.
Given that credit unions are member-owned financial services providers, credit unions strive to develop these programs in such a way the costs can be covered for the programs, but at reasonable fees for the members requesting the service, CUNA has noted.
Importantly, GoBankingRates.com underscores that overdraft fees are controllable and avoidable by the account holder.