Study: ‘Credit Marginalized’ Relying on Overdrafts

Report comes as Biden Administration renews focus on “junk fees.”

David Baumann


Oct 17



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David Baumann

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David Baumann

A squiggly pink arrow pointing downward and to the right.
A bank statement showing overdraft charges.

Almost half of the consumers with marginalized credit used overdrafts or experienced transaction declines due to insufficient funds in their bank accounts last year, according to a new survey.

Overall, 20% of the total number surveyed by PYMNTS and Sezzle used overdrafts or had a transaction declined, the companies said.

PYMNTS, a website that covers the payments industry, and Sezzle, a payments platform, defined “marginalized consumer” as a person who had been denied credit at least one during the past year.

The firms surveyed 2,848 U.S. consumers between June 8 and June 21 of this year about their experiences and perceptions.

“People who live paycheck to paycheck, millennials and the credit marginalized tend to use overdrafts the most—and, at the same time, are the most vulnerable consumer groups,” the study states.

Overdrafts in Spotlight

Overdrafts and policies governing them have remained a hot topic in the financial services industry. Last week, the CFPB reported that nearly two-thirds of the largest banks have eliminated Non-sufficient Fund (NSF) Fees, compared with only four of the 20 credit unions with at least $10 billion in assets.

That report came as the Biden Administration renewed its effort to eliminate so-called “junk fees” charged by companies ranging from credit unions to travel services.

Additional Findings

PYMNTS and Sezzle also reported that:

–About 94% of consumers who used overdrafts to cover charges of more than $400 also reported having other economic hardships, such as problems paying bills. That compared with 77% of those consumers who used overdrafts to cover charges up to $100.

–39% of the consumers who said they were living paycheck-to-paycheck had overdrafts, compared with 6.3% of those not living paycheck-to-paycheck.

–62% of the consumers who attempted a transaction without having sufficient funds in their accounts were charged an overdraft fee. The average flat fee charged was $29.

The companies additionally found that nearly two-thirds of overdrafts led to other, broader credit accessibility issues.

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