Overdraft fees for banks and credit unions can be steep. The average overdraft fee is $27, with many institutions charging up to $38.

This practice of charging high overdraft fees is causing numerous customers of banks and credit unions to suffer additional financial pressure.

In many cases, the overdraft practices of banks can largely contribute to the customer’s already tight financial situation and amount to further expenses digging them into a deeper hole.

According to a recent report released from the Center for Responsible Lending (CRL), data from the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corporation was examined regarding overdraft practices of banks.

The report found the overdraft fees were considerably lucrative for banks, which would make it unlikely for the practice to ever cease completely. Even if some banks reformed their overdraft practices, the fees make too much profit for the banks to completely discontinue.

Last year banks had earned $14 billion from overdraft fees alone, and $17 billion when other insufficient fees are included.

“CRL’s analysis confirms that overdraft abuses continue, carrying an enormous annual price tag for consumers as a whole, and with devastating effects on individuals,” said Peter Smith, a CRL senior researcher and co author of the report.

CNN Money points out that in the first three months of 2015, the country’s three big banks: JPMorgan Chase, Bank of America, and Wells Fargo had made approximately $1.1 billion in overdraft fees. This projects to $4.5 billion in total for 2015, with $20 per American adult in overdraft fees.

Overdraft Fees: A Slippery Slope

However for big banks, their overdraft practices only account for less than 6% of non interest revenue while smaller banks are significantly more impacted.

The study found that smaller banks make an overall medium of only 8% in non interest revenue, while overdraft fees make up well over 40%. This means that smaller banks are very dependent on overdraft fees, and it is an integral part of their business model.

Some smaller banks encourage customers to keep an eye on their bank accounts to prevent overdraft fees, like Investors Bank. Investors Bank charges a standard $30 overdraft fee, with the bank’s website stating it will determine whether or not pay or decline the transaction.

However like other banks, Investors Bank does not appear to have any inclination to stop or reform their overdraft policy. In general, overdraft fees are probably not going away with the probability of insufficient fund fees remaining a constant risk for financial institutions.

Most commonly, overdraft fees incur when money is needed to be transferred from a different account into the primary checking account to make purchases. However the bank can charge multiple for overdrafts before the account is sufficient, and may impose other fees the customer was not aware of.

On remedy the CRL had recommended, was simply to deny charges when the customer does not have sufficient funds to make the purchase. This would prevent the customer from falling into any hole regarding overdraft fees, and prevent further financial strain.

As of Aug. 15, 2010, banks and credit unions were no longer allowed to charge overdraft fees unless the customers opted in for overdraft protection. However, this policy has not stopped customers from incurring financial trouble under the slippery slop of overdraft fees.

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