Small banks are not much better than big banks when it comes to the fees they charge customers who spend more than they have in their accounts.
That is the finding of a new report published last week by the Pew Charitable Trusts, which used "secret shoppers" to request information from 45 smaller banks from across the country, to examine their overdraft practices and penalty fees.
The findings are not surprising, said Lauren Saunders, associate director of the National Consumer Law Center. "Some smaller banks are far more addicted to overdraft fees than bigger banks," she said.
Pew's consumer finance project has studied overdraft practices at large banks for several years. This year's report, also published last week, found that most big banks continue to charge high fees, and often charge multiple fees, when customers overdraft. Overdraft and related fees have more than doubled over the past 30 years, Pew said, while bank income from charging interest has fallen.
This year, Pew also studied a group of smaller banks, which offered a snapshot of bank practices. While the sample did not represent a cross section of small banks across the country, Pew said, the findings highlight "common" practices at many banks.
The study found that the typical overdraft fee at a small bank was $32, which is not much lower than the $35 charged by big banks. All 45 of the smaller banks allow customers to run up fees of at least $90 each day, and many permit accumulation of much higher daily totals, the analysis found.
On the plus side, the smaller banks were less likely to reorder a customer's debits in order of the largest amount to the smallest — a practice that tends to increase the number of overdraft fees the bank can charge.
Historically, said Joy Hackenbracht, a research officer with the consumer banking project, overdraft coverage was considered a "courtesy" extended to customers occasionally, such as when a customer bounced a check. But as debit card and ATM transactions became the norm, overdraft fees became more common.