Overdraft Fees Drain $12 Billion Annually from the Poorest Bank Customers

In 2024, U.S. consumers paid approximately $12.1 billion in overdraft and nonsufficient funds (NSF) fees. While 26.5% of households incur at least one overdraft fee per year, the burden is wildly concentrated: just 7% of accounts overdraft 10 or more times annually, yet this group generates roughly 75% of all overdraft fee revenue. These are not careless spenders — they are people whose income barely covers their expenses, living in a perpetual margin-of-error zone where a $4 coffee can trigger a $35 fee. The mechanics are predatory by design. Banks process transactions largest-to-smallest rather than chronologically, which maximizes the number of small transactions that overdraft after a large debit clears. A customer with $100 in their account who makes five $20 purchases and one $100 purchase could be charged one overdraft fee (if processed chronologically) or five fees (if the $100 clears first). Many banks chose the latter method for years, and while some have reformed, the practice is not universally banned. The average overdraft fee was $26.61 in 2024, and for a customer who overdrafts 10 times per year, that is $266 in fees — real money for someone already living on the margin. JPMorgan alone collected $815 million in overdraft-related revenue in the first nine months of 2025, an increase from the same period in 2024. TD Bank collected $190 million, up 13.8% year-over-year. These fees are a significant profit center for large banks, and the customers generating them are the ones least able to afford the cost. The CFPB finalized a rule in December 2024 to cap overdraft fees at $5, projected to save consumers $5 billion annually, but Congress repealed the rule before it could take effect. The structural reason this persists is straightforward: overdraft fees are enormously profitable and disproportionately extracted from customers who have no leverage and limited alternatives. A customer who frequently overdrafts cannot easily switch banks because they may be flagged in ChexSystems, the banking industry's blacklist for customers who have had accounts closed. They are trapped in a cycle where the fees that punish them for being poor make them poorer, which makes them overdraft more, which generates more fees. The banks lobbied successfully to kill the CFPB's fee cap, demonstrating that the political system is aligned with preserving this revenue stream.