Bank and Credit Union Fees: In States without Payday Lending, Consumers Pay More

Nationally, the average American household with a bank or credit union checking account pays $368.51 each year in overdraft protection (ODP) or non-sufficient funds (NSF) fees.

In states where payday loans are available, the average consumer pays $240.79 per year in ODP and NSF fees--$127.72 less than the national average.  On the other hand, in states where payday loans have been eliminated, checking account holders pay, on average, $541.65 each year—that’s $300.86 more than their counterparts who live in states with payday loans.

A customer typically pays $15-$17 per $100 for a payday advance. Comparatively, the average ODP/NSF fee is $27, regardless of the amount of the overdraft.

Many informed consumers choose to take out a payday loan rather than overdraw their checking account. This explains why, in states where payday loans are an option, consumers pay less.

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1. G. Michael Flores, Bank Strategist, Bretton Woods Inc.
2. FDIC Study of Bank Overdraft Programs, Federal Deposit Insurance Corporation, November 2008