Cost of overdraft protection
December 8, 2008 | alternatives, industry, personal finance | Comments (0)This FDIC smack down of overdraft protection has caught the attention of the Center for Economic and Entrepreneurial Literacy. From its news release:
A customer who makes an on-premise purchase with a debit card and overdraws their account by $20, paying it back two weeks later, will suffer an average overdraft fee equal to 3,520 annual percentage rate (APR) in interest. And it could be even worse! If the customer overdraws by just $1 and pays it back in two weeks, some of the higher bank fees – $37 or more – are the equivalent of 96,200 percent APR. Those interest rates dwarf by wide margins what a borrower would pay for a wire transfer loan from a friend or family member, a credit card cash advance, or a short-term payday loan.
This PR tide is turning against banks.
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