NEW YORK — Bank overdraft fees remain a significant source of consumer costs and bank revenue despite years of regulatory scrutiny, with many financial institutions continuing to charge fees of more than $30 after a federal rule that would have capped the charges was repealed before taking effect, according to a new analysis.
The New York Times reported that the average overdraft fee charged by banks is $27, citing data from financial research firm Moebs Services, although some institutions charge as much as $42 for a single overdraft transaction.
Research has consistently shown that a relatively small percentage of consumers generate the majority of overdraft fee revenue. Federal studies have found that consumers with lower incomes, lower credit scores, less education and nonwhite customers are disproportionately affected by the charges.
Typical Transaction Under $50
The Times also cited research from the Federal Reserve Bank of New York showing that about half of the purchases or withdrawals triggering overdraft fees involve transactions of $50 or less.
Alex Horowitz, a project director at the The Pew Charitable Trusts, told the newspaper that the fees remain broadly unpopular among consumers.
“We still see a lot of banks with overdraft fees in the $34 to $39 range,” Horowitz said.
The issue has resurfaced on Capitol Hill after a Biden administration proposal to cap most overdraft fees at $5 per transaction was overturned by the Republican-controlled Congress before it could take effect. Federal officials had estimated the rule would have saved households that incur overdraft charges an average of $225 annually.
At a recent hearing before the United States Senate Committee on Banking, Housing, and Urban Affairs, lawmakers from both parties criticized current overdraft practices.
‘Crushing Working Americans’
Bernie Moreno, an Ohio Republican, criticized banks that process withdrawals before deposits, arguing the practice can unnecessarily trigger overdraft fees.
“It’s crushing working Americans, and it’s fundamentally unfair,” Moreno said during questioning of Lindsey Johnson, chief executive of the Consumer Bankers Association. Moreno suggested banks could voluntarily abandon such practices or Congress could prohibit them.
Chris Van Hollen, a Maryland Democrat, said relatively minor purchases can still generate substantial penalties.
“You can go and get a cup of coffee and not realize that your three-buck cup of coffee ended up getting you a $35 overdraft fee,” Van Hollen said during the hearing.
In prepared testimony, Johnson defended overdraft programs, describing them as financial “shock absorbers” that help consumers manage short-term cash flow shortages.
The National Consumer Law Center estimates that banks and credit unions generated approximately $12.4 billion in overdraft and related fees during 2025, up from about $12.1 billion the previous year, according to the newspaper’s analysis.
