Overdraft fees cost young adults millions
“Through these arrangements, banks gain exclusive access to a large student population they hope to turn into lifelong customers; at the same time they offer universities the potential of significant revenue,” the study reports. The study recommends that universities avoid such partnerships. It used to be the norm that banks and credit unions declined to honor checks or debit card payments if a customer’s checking account lacked sufficient funds. Today, however, they routinely cover the shortfall amount, then charge a fee for doing so. The financial institutions also require that the customer cover the shortfall amount. The report issued is the latest in a series of studies the Center for Responsible Lending has issued on what it considers “abusive” overdraft policies. In the past the American Bankers Association has responded that overdraft policies are appreciated by customers who want to avoid embarrassment and the fees charged by merchants when a check bounces or a transaction is denied. The ABA has also pointed out that consumers have options to avoid overdraft fees, including arranging with their bank to have overdrafts paid through a line of credit or a savings account. The Center for Responsible Lending also recommends that consumers exercise such options.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! By David Ranii RALEIGH NEWS & OBSERVER College students and other young adults pay banks nearly $1 billion in fees each year for overdrawn accounts, according to a new national study. Young adults ages 18 to 24 pay more than $3 in fees for every $1 their account is overdrawn. They are particularly susceptible to such charges because of their widespread use of debit cards for even small transactions, according to a study issued Monday by the Center for Responsible Lending, a nonprofit group based in Durham, N.C. “Abusive overdraft practices by banks are stripping funds from the checking accounts of young adults,” the report concludes. “Many students and young workers find themselves owing hundreds of dollars in fees before they even realize they have overdrawn their accounts.” At least 100 colleges nationwide contribute to the problem by forming partnerships with banks, the study contends. Under these deals, the universities and banks offer co-branded ID cards that double as a debit card linked to a checking account at the partnering bank.