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Report
Who Pays the Price? Overdraft Fee Ceilings and the Unbanked
Would capping overdraft fees increase financial inclusion? Studying an event in which caps were relaxed, we find banks raised overdraft fees but also expanded overdraft coverage and deposit supply, leading more low-income households to open accounts. While inattentive depositors may not benefit from being banked, the rise in account ownership persists, suggesting newly banked households valued their account even after learning about its costs. We find no evidence that being banked weakens households’ broader credit health, including delinquency, indebtedness, and credit scores. We conclude ...
Discussion Paper
Learning by Bouncing: Overdraft Experience and Salience
Overdraft credit, when banks and credit unions allow customers to spend more than their checking account holds, has many critics. One fundamental concern is whether overdrafts are salient—whether account holders know how often they overdraw and how much it costs them. To shed light on this question, we asked participants in the New York Fed’s Survey of Consumer Expectations about their experience with and knowledge of their banks’ overdraft programs. The large majority knew how often they overdrew their account and by how much. Their overdraft experience, we find, begets knowledge; of ...