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FABB Snapshot: Overdrawing Accounts Rises As Economy Worsens

FindABetterBank (FABB) has been live since February 1, 2008. We thought it would be interesting to see how consumers’ banking behavior, feature preferences and checking account choices have changed over the last year. This analysis will be presented as a series on how the economy has affected consumers’ banking behavior.

More people are overdrawing their checking accounts today than they were a year ago (see Figure 1). In fact, the number of people who now overdraw their account has grown by nearly 50% over the last year. Equally troubling is the growth of the number of people who overdraw their checking account a lot (4 or more times).

Tip on how to avoid overdraft fees: Use cash instead of debit cards. If you’re in a situation where your balance nears $0, overdraft fees are a killer. Even if you have Overdraft Protection, many banks still charge an “Overdraft Transfer Fee” to move money from another account or credit line into your checking account. Consider switching to a bank that doesn’t have this fee. But short of switching banks, stop using your debit card and only spend the cash in your pocket. That way, you won’t accidentally slip below $0 when you’re buying a cup of coffee.

Background information and notes: FABB users answer questions to estimate fees of checking accounts in their search results. Since FABB was launched, over 62,000 people have answered these questions to compare checking accounts.

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