What do banks do with overdraft fees?

Question

Why is it necessary to charge such high fees?

Answer 1

Some banks charge the fee to make a profit...

some to help cover the interest lost if they paid the over draft...

The whole point of the fee is to make you stop and think about overdrawing your account... why pay a 25 to 50 dollar fee for a 10 or 15 dollar check.... it's a penalty...

Banks are in business to make a profit just like any other company!

Answer 2

How do your think they pay their employees and build those offices? Fees are a large source of income. I just looked at my banks annual report on-line. Over 40% of their income comes from fees.

BTW, ALL bank fees are optional. They tell you up front what they charge fees for. Don't do those things, and they won't charge you fees.

Answer 3

Because they can, and they are doing you a favor in a way, by allowing you what is in effect CREDIT by paying a bill for you that you were not able to pay for whatever reason. If you don't mess up with your payments you will avoid having to pay these high fees. In a way it is good, because it teaches you not to write checks when you can't balance your checkbook - by "punishing" you with the high overdraft fees!

Answer 4

I have read that banks actually make TONS of money off fees and all that imposed on their various accounts and loans just like credit card companies do. Unfortunately, most of us dont know this till we have bit hit or once ourselves and you know what, mistakes happen. It happens to most people at least once no matter how responsible you are.

Answer 5

Because what you over draw comes out of there funds they replenish there funds, and the rest goes to making the banks better and building more banks. Why are you overdrawing?