Newsweek’s Steve Tuttle offers a contrarian view of the overdraft debate.  Refreshing, actually.

Bank of America has settled a class action lawsuit totaling $35 million for predatory overdraft policies between 2000 and 2007.  If you were a customer at that time, you can claim your $78 here.  Unfortunately that comes no where near the $368 per year the average household pays in overdraft fees.  For those doing the math at home, that means if you were a Bank of America customer for the entire 7 year period of the class, you likely paid them an average of $2,576 and they’re kindly throwing $78 (or about 3%) of your money back at you.

Hidden Consumer Loans: An Analysis of Implicit Interest Rates on Bounced Checks by Mark A. Fusaro, Department of Economics, East Carolina University, finds that the median interest rate on bounce protection loans is in excess of twenty times that of payday loans. 

Fusaro writes, “Payday lending attracts attention for its high interest rates, but bounce protection loans are much more expensive. When the amount borrowed is low and the time outstanding is short, the effective interest rate paid on this loan can be quite high.”

Additional findings include:

• People of all income levels overdraft equally often
• Customers using bounced checks as personal loans account for twenty percent of overdrafts
• Service charges are a profitable income source for banks
• When a bank pays overdrafts, customers overdraft 50% more

Study highlights