The familiar narrative out of Washington about overdraft service generally holds that consumers are hapless victims of evil banks, who set up overdraft plans like mousetraps to snatch fees.
It’s true that some institutions don’t have a history on overdraft policy to brag about, but much of the narrative is flawed because only a comparative few consumers wind up overdrawing by accident, according to a report on people’s attitudes towards overdraft from Curinos. In fact, the report confirms, many consumers depend on the availability of overdraft service as a form of quasi credit, and they don’t want it to be regulated out of existence.
“More than 60% of overdrafts come from consumers who intend to use the service,” the report states. “More than 80% of overdraft transactions come from consumers who opted in to debit card overdraft programs with the clear intention of using it to cover their payments.”
Even among the heaviest users of overdraft service, the surprise overdraft is relatively rare. Only 17% of consumers in that group who went into overdraft said it was because they did not know that their balance was running low.
People Value Overdraft:
The research found that two thirds of consumers say that while overdraft is clearly expensive, they don’t want to lose access to the service.
This should give pause to institutions that think the sole answer for their consumer base is to follow institutions, like Ally, that have killed overdraft availability outright.
Making no change to your program, however, will likely cause your institution to fall behind competitively. Though many consumers don’t want to lose overdraft service, for banks and credit unions to merely stick to the same-old, same-old approaches is not going to cut it. Perceptions help drive product inspiration and marketing to laggards’ detriment.
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