Consumer Overdraft Polls Offer Conflicting Views
Boyer, Meghan, American Banker
Two surveys on debit card overdraft fees have reached very different conclusions about consumer preferences.
According to a survey the Center for Responsible Lending released last month, the majority of cardholders want financial companies to deny transactions if their accounts do not have enough funds to cover them, instead of approving the purchases and charging overdraft fees.
However, a survey released by the American Bankers Association in August of last year found that most debit cardholders are glad their institutions cover overdraft purchases.
"The easy answer is that they're both right and both wrong," said Red Gillen, a senior analyst with Celent LLC, a Boston market research unit of Marsh & McLennan Cos. "Consumer ire is conversely related to transaction size and importance."
Consumers want overdraft protection and will pay fees to cover large purchases, Mr. Gillen said, but they tend to get upset when banks apply the same policy to small purchases.
He also said the sponsors of the two surveys are not unbiased on this issue.
The survey sponsored by the Center for Responsible Lending, a Washington nonprofit that advocates against abusive financial practices, found that 80% of respondents would prefer their banks to deny $5 transactions if the funds are not available, 79% want $20 transactions to be denied, and 77% want $40 transactions to be denied. Opinion Research Corp. conducted the survey of 2,000 U.S. checking account holders in January.
Consumers pay about $17.5 billion of overdraft fees to cover $15.8 billion of credit extended to them annually, according to the center.
"The majority of overdrafts are caused by small purchases," said Leslie Parrish, a senior researcher at the center. "There's frustration with a bank covering a $5 latte" with a $34 fee, for example.
The ABA survey of 1,000 U.S. adults found that 88% of cardholders who had paid an overdraft fee in the previous 12 months were glad their financial institution covered the purchase.
Only 11% said they would have preferred the bank to have denied the transaction. Ipsos Reid conducted the survey in July.
Carol Kaplan, a spokeswoman for the ABA, said that consumers are often glad banks cover debit purchases in situations such as an emergency visit to a veterinarian. …