Frequent Overdrafters Live on the Financial Edge

Number of the Day: The most relevant or interesting figure in personal finance


That’s how little credit is available to people who frequently overdraw their bank accounts—a stark reminder of the slim financial margins that often lead to the overdraft fees a prominent online bank has now permanently removed.

People who very frequently overdraw often don’t even have credit cards, but if they do, the available credit on them is just a tiny fraction of the $14,100 available to those who never overdraft, according to a 2017 study by the Consumer Financial Protection Bureau. These very frequent overdrafters—defined as those who incur more than 20 bank penalties a year for attempting transactions without enough money to cover them—also tend to have lower credit scores and lower bank balances. They make up just 5% of bank customers but pay 63% of all overdraft and insufficient fund penalties, the study showed.

Advocates for people living paycheck to paycheck scored a win Wednesday when Ally Bank said it would eliminate its fee of $25 per overdraft. 

"Nationwide, more than 80% of overdraft fees are paid by consumers living paycheck to paycheck or with consistently low balances—precisely the people who need help stabilizing their finances,” Ally Financial CEO Jeffrey Brown said in a statement. “Eliminating these fees helps keep people from falling further behind and feeling penalized as they catch up."

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Consumer Financial Protection Bureau. "Data Point: Frequent Overdrafters."

  2. Ally. "Ally Bank Eliminates All Overdraft Fees, Ending Centuries-Old Industry Practice and Lifting Consumer Burden."

Related Articles