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Overdraft charges and fees aren’t as profitable as they used to be

Conrad Wilson Sep 10, 2014
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Overdraft charges and fees aren’t as profitable as they used to be

Conrad Wilson Sep 10, 2014
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The commercial banking industry made $32.5 billion in fees last year, according to data from the Federal Deposit Insurance Corporation. But the banking industry isn’t making as much off overdraft charges and other fees as it used to. 

“The banks are making lots of money on their fees, but it’s significantly less than it was a handful of years ago,” says Jefferson Harralson, associate director of research at the investment banking firm Keefe, Bruyette & Wood.

In 2009, banks made almost $8 billion more in fees. 

Harralson says financial regulation played a big role. “There’s been new rules to limit when you bounce a check,” he says. “If you go slightly below zero, you don’t bounce now.”

Banks also don’t charge as much for debit card transactions these days.

But not everyone agree that banks are making that much less.

“The perception is there’s been this massive decline in service charges. I don’t think that’s been the case. I think the growth has slowed down,” says Christoper Marinac, a research analysts at FIG Partners. “What’s happening is that banks are finding other ways to make fee income.”

Analysts say that’s why some banks have scaled back on things like free checking accounts.

Richard Hunt, CEO of the Consumer Banking Association, argues some financial regulation was needed. But he says Congress went too far when it decided how much banks can charge for services.

“Yes, we’re in the business of making money. Yes, we should charge for our services, as long as it is reasonable and transparent,” Hunt says.

In other words, bank fees are here to stay.

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