Overdraft revenue at banks and credit unions is rebounding a bit after a sharp decline that began in 2008, newly released data shows.
After falling to $31.1 billion in the third quarter of last year, annualized overdraft revenue rose 2%, to $31.8 billion, in the same period this year, according to data from Moebs Services.
“In the last six months, we have seen overdraft activity pick up,” says Michael Moebs, chief executive officer of Moebs Services.
Annualized revenue from overdrafts peaked at $37.6 billion in the third quarter of 2008, and then fell by 1%, 9%, and 8% in the succeeding years.
The earlier fall in overdraft revenue came as some banks – under fire for reordering transactions in order to maximize such revenue – cut their overdraft fees. JPMorgan Chase (JPM), Wells Fargo (WFC), U.S. Bancorp (USB) and SunTrust (STI) were among the depositories that reduced charges.
But debit card usage has continued to grow, which may help explain the recent uptick in overdraft revenue.
Data from Moebs Services shows that on an annualized basis there were 52.6 billion U.S. debit card transactions in the third quarter of 2012 – an 11% increase from the same period a year earlier.
That increase in card usage is helping to partially offset the swipe fee revenue lost as a result of price caps instituted on October 1, 2011.
In the third quarter of 2011, just before the price caps went into effect for banks with more than $10 billion in assets, debit swipe fee revenue across the industry was $19.9 billion on an annualized basis.
That figure fell to $18.5 billion in the third quarter of 2012. That’s a 7% decrease, which is less than might have been expected, given that swipe fees for each transaction were cut nearly in half.
