QoD: What percent of consumers overdraw their checking accounts annually?
- Why do you think that so many people overdraw their checking account?
- What steps can YOU take to avoid overdrawing your account?
CFPB study: "A small group of consumers pay most of these fees. In a given year, only 30% of consumers overdraw their checking account. The 8% of consumers who overdraft more than 10 times per year pay 74% of overdraft fees. These consumers are charged $380 in overdraft fees on average annually"
How to avoid this fee: Know your checking account balance before using your debit card or writing a check. That’s the best way to avoid this fee. But that can be easier said than done.
Using a credit card for purchases will also avoid overdrafts. It buys you some extra time, since you don’t have to pay for these purchases until your statement payment is due. But make sure you pay it then, otherwise high annual percentage rates (APRs) could be more expensive than overdrafts over time.
Here's a NEW! Activity to extend this question of the day and help students avoid these fees, MOVE: To Understand Overdraft Fees
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
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