LAKE BLUFF, Ill. Overdraft revenue fell, on an annual basis, for banks, thrifts and credit unions, by almost one billion dollars in Q1 2013, from the end of 2012, according to a new overdraft study by Moebs $ervices.
The 2.8% drop was the first quarterly drop in OD revenue since the fourth quarter of 2011. The study is based on Federal Reserve call report data.
Michael Moebs, economist and CEO at Moebs $ervices, told Credit Union Journal that the decline resulted largely from consumers seeing smaller paychecks this year due to the end of the Social Security payroll tax cut Jan 1, as well as from the after effects of holiday spending.
“Consumers are hunkering down a bit, being more watchful of their spending and avoiding overdrawing their checking accounts,” said Moebs, who indicated overdraft revenue is becoming a barometer of the sluggish economy.
Moebs also stated that some of the drop is seasonal, with February typically being a weak month for OD revenue. “But this time the drop started earlier, in January, and continued through March.”
Total service charges from all deposit accounts also dipped Q1, by 2.9%, the first time total service charges fell in two years, added Moebs, who said the result also indicates consumers are watching their finances.
Moebs believes the drop is temporary and that OD revenue will pick up this year and continue the strong comeback it exhibited in 2012. Overdraft revenue for banks, thrifts and CUs came back in 2012 to $32 billion, according to Moebs. Following the Fed’s Reg E Opt-In regulation for debit card and ATM overdrafts in 2010, overdraft fee revenue fell to a low of $31 billion in Q1 2012, down from $37.6 billion in Q3 2008. Last year’s OD survey by Moebs of 2,700 FIs found that as of June 2012, CUs enjoyed their best 12-month period for OD revenue in their history, collecting $5.5 billion.
