Banks’ New Market: The Affluent Overdrafter

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INDIANAPOLIS – Many of the bank customers responsible for the biggest overdrafts aren’t broke, they just happen to be big spenders.

Now, some banks are trying court them as potentially lucrative customers while at the same time reducing overdraft losses.

American Banker, an affiliate of Credit Union Journal, reported that Salin Bank and Trust Co. in Indianapolis, for instance, used to impose static overdraft limits of $500 to $750. In April, it began using technology to analyze customers’ income and spending activity and raise or lower their overdraft limits accordingly.

Today, Salin does not permit some of those customers to overdraw their accounts at all. Others are allowed to overspend by as much as $5,000.

“The losses [from overdrafts] have decreased … more so than we expected that they would,” said Robin Walker, EVP and director of administration and retail banking for Salin.

The bank charges $32.50 for each overdraft. Salin was initially attracted to the technology that enables it to implement individualized overdraft limits as a risk-mitigation tool, Walker says.

Salin uses technology from Velocity Solutions Inc. called the Intelligent Limit System. This technology distinguishes which customers overdraw their accounts because they have no money, and should be cut off, from those who overdraw because they are wealthy enough to cover large expenses, American Banker reported. These limits can change from day to day, based on fresh evaluations of customers’ income and spending habits. Customers can learn of the limits on their accounts by phoning the bank.


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