Sneaky Bank Overdraft Fees are a $33 Billion Industry
When consumers fall a little short, banks are there to reap the benefits! According to the Wall Street Journal, overdraft fees totaled $33.3 billion in 2016, the highest in seven years. Banks charge overdraft fees when a consumer makes a transaction in an amount higher than their checking account balance. With overdraft fees, the consumer pays the price while the bank profits.
Enter Dave, an app that helps consumers prevent overdraft fees by predicting their future expenses and unlocking their next paycheck. Customers pay $1 per month for this service, a fraction of the cost of an overdraft fee which can run around $35 per transaction (median price across US banks). Customers that wish to borrow from Dave can do so for much less than the typical 17% interest rate for an overdraft or 400% for a payday loan: they can pay a voluntary tip to be determined by the customer.
Once a customer connects a checking account with Dave, the app analyzes their bank history and predicts a 7-day low, which reflects the lowest a customer’s account will get in the coming week. If the balance in the account is forecasted to be below zero, Dave will alert the customer to take action. One option is to advance $250 from their upcoming paycheck in order to bring their account to a positive balance. Instead of paying interest on this small loan, customers can make an optional donation to the company. Dave will even plant a tree, through trees.com, for every % of a customer’s tip.
Billshark recommends Dave because the company empowers consumers to fight sneaky fees. According to Dave, over 25% of Americans have experienced an overdraft on their account in the past year. Even current Dave investor and billionaire Mark Cuban struggled with overdraft fees before he became successful. Overdraft fees became such a problem in the United States, reaching all-time highs in 2009, that the Federal Reserve implemented a rule that prevented banks from automatically charging consumers overdraft fees, some even as high as $45 per transaction, on their debit card and ATM transactions. Although banks and analysts expected that overdraft fees would plummet, the growth rate in 2016 is the highest annual increase since 2009. Consumer advocates say that banks use sneaky strategies to lure customers to opt-in to overdraft protection. As we shared with you before, 52% of consumers don’t remember opting in to overdraft protection service. Many banks have aggressively promoted this service online and in branches when customers open new accounts.
Check out Dave and outsmart those sneaky overdraft fees.