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Do consumers really have a need for overdraft services?


December, 2022


Yes. Although it’s not an ideal situation to have an overdrawn account, research continues to show that many consumers have a need for short-term liquidity.

Recent research shows that three in five consumers are living paycheck to paycheck, and nearly one in five struggle to pay their bills. Even people making $100,000 to $150,000 (more than double the nation’s median income) are now living paycheck to paycheck. Another study reveals that 77% of Americans feel anxious about their financial institution. Everything points to widespread financial instability, especially in this economically challenging time.

The need is already there. So, the real question is, ‘Do you have an effective overdraft solution to offer your account holders?’

A compliant, pro-consumer overdraft program provides a valuable service to your account holders while remaining above regulatory scrutiny. It’s also:

  • Easy for your account holders to understand
  • Straightforward for your staff to explain
  • Fully disclosed and transparent
  • Well-communicated
  • Fair and unbiased
  • Responsible
  • Inclusive of daily caps, de minimis and other allowances
  • Closely monitored to ensure best practices

Although many complexities must be addressed and the right resources must be in place to manage the program, it’s an extremely important service for account holders to have access to.

A compliant, pro-consumer overdraft program should NOT encourage your account holders to overdraw or mismanage their checking accounts. It should be offered responsibly by your financial institution and used responsibly by your account holders. The goal of the service should be providing a short-term solution for your account holders so they don’t have to look elsewhere for assistance and financial peace of mind.

The reality is that most consumers experience short-term cash flow needs at some point during their lives. And now is an especially difficult time for many Americans. So, while some may choose to discontinue offering the service, it doesn’t eliminate the consumer need. It only puts account holders in a more difficult position — having to find help elsewhere, when a better option would be to go through their financial institution.

As a financial institution, keeping reality and current economic conditions in mind and offering the services that account holders need is mutually beneficial. Isn’t the better option for account holders to know they have a trustworthy and reliable safety net if they need it?


ADVANTAGE, powered by JMFA, is dedicated to empowering financial institutions with strategic solutions for growth and success. Our comprehensive services include overdraft program consulting and compliance, checking account acquisition strategies, contract negotiation expertise, and consulting for technology strategy, evaluation and selection. With a rich history of serving credit unions nationwide, we are committed to delivering exceptional value and fostering long-lasting partnerships. Choose ADVANTAGE, to elevate your performance, identify new opportunities, and build more value.