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Study of Overdraft Opt-in Rates Says the Higher the Overdraft Price, the Lower the Opt-in Rate
Monday, October 27, 2014 6:30 AM

A new study of overdraft opt-in rates indicates that the higher the overdraft price the lower the opt-in rate, and the bigger the institution, the higher the overdraft charge. The study, by Moebs $ervices, found that as a result the large majority of credit unions enjoy markedly higher opt-in rates than banks. 

The Moebs $ervices Opt-In Study revealed that credit unions enjoy opt-in rates at 56.7 percent while bank customers opt-in at a 31.7 percent clip. "Also, 74.4 percent of all depositories offer debit card overdrafts, and, significantly, 25.6 percent do not," said Michael Moebs, economist and CEO at Moebs $ervices.

A recent Moebs overdraft pricing study shows that banks' median overdraft charge is $30 and has remained stable in the last two years. Credit unions' median price is $28.50, a dollar amount that has been inching up. Moebs reminded that with Regulation E in 2010, the Federal Reserve required mandatory opt-in by banks, thrifts, and credit unions for consumers for debit card overdrafts.

"Measuring Opt-In rates for financial institutions has always been elusive, with the Consumer Financial Protection Bureau primarily relying on data from a small segment of very large banks. The Moebs Services Opt-In Study developed a methodology to measure opt-in rates utilizing a broad (2,806), statistically selected sample of FIs."

The Moebs analysis first identifies FIs that do not offer debit overdrafts. Then, eliminating those that don't offer the service, it compares debit overdraft only to those FIs that offer checking account overdrafts and debit card overdrafts. 

"Under other methodologies, FIs often under-reported their opt-In rates, since over 25 percent of the institutions did not offer debit card overdrafts," said Moebs. "Correcting for these measurement inaccuracies the usage numbers become more accurate and provide a better comparison of the differences between FI types."


Source:  CUtoday.Info