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Data Point: Overdraft/NSF Fee Reliance Since 2015 – Evidence from Bank Call Reports

In this report, we use Call Report data since 2015 to study the evolution of banks’ reliance on overdraft and NSF fees. Despite drops in overdraft/NSF fee reliance experienced by most banks during the pandemic, we find that the market for overdraft and NSF has been quite stable. Aggregate and institution-level overdraft/NSF fee reliance has been remarkably persistent before the pandemic and this persistence was mostly maintained even during the pandemic. It is not possible to determine how much of the drop in overdraft/NSF fee reliance during the pandemic was due to changing institution policies and practices and how much was due to changing consumer use patterns. That said, we document important changes in consumer use of checking accounts, the most important of which is the increase in checking account balances, that likely contributed to the observed decline in overdraft/NSF fee reliance. Whether these changes are temporary in nature or reflect longer-term shifts in consumer behavior is an open question. Correspondingly, it is an open question whether overdraft/NSF fee reliance will return to pre-pandemic levels or the shifts experienced in this market during the pandemic are preludes to further market-wide changes.

For our latest review of overdraft/NSF policies, please see the most recent table tracking overdraft fees and policies across banks, as well as the most recent chart on NSF fee practices.

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