Banks are expected to record $35.4 billion in overdraft fee revenue this year, down 4.6% from 2009 and flat with 2008, according to Moebs Services.
Next year, the figure is likely to grow 7.3% to $38 billion, the highest ever, the research firm said.
The latest 2010 figure is up 0.6% from the amount economist Michael Moebs forecast in March. He now expects the median overdraft price to increase to $28 a check this year from $26 in 2009. In March, he predicted the price would average $27 a check in 2010.
Moebs's recent study, which analyzed fee revenue from 2,284 banks and credit unions for the first six months of 2010, showed that revenue bottomed in the first quarter and started to rebound in the second quarter. Revenue is expected to fall in the third quarter but recover by the same amount in the fourth.
Moebs estimated that financial institutions' profit was cut by about $6.3 billion as floors and ceilings on overdrafts reduced revenue and they incurred costs from new federal rules that permit banks to charge overdraft fees only if a customer opts into an overdraft program.
While overdraft fees are an important source of revenue for banks, some big banks said earlier this year that they would eliminate those fees on debit-card purchases in response to criticism from consumers and Congress. Meanwhile, smaller banks and credit unions started offering overdraft protection for the first time.
Moebs' latest study also found 44% of banks and credit unions made some type of change to their overdraft program this year, with about a fifth raising prices and 6.5% enacting cuts. "We have never seen this many institutions decrease the price of a fee service in almost 30 years of tracking bank and credit union pricing," he said.
About 90% of overdraft revenue comes from frequent users, who have 10 or more overdrafts in a year.
Moebs also found that between 60% and 80% of consumers have chosen to be in an overdraft program. The recent financial overhaul law passed by Congress that has changed regulation of how banks should authorize such overdrafts. Bank customers must sign up for overdraft protection before the company is allowed to charge the customer a fee or allow an overdraft to go through. Many banks, which are eager to retain these fees, have recently launched campaigns encouraging consumers to opt in.