Does Your Overdraft Program Place Value Above Fees?

By Richard Miller, Executive Vice President at John M. Floyd and Associates
Summer 2018

In the past few years, big banks have made it increasingly difficult for Americans to keep a basic free checking account. Consider the following:

This presents an opportunity for your bank or credit union to shine. By evaluating all fees — including your overdraft fee — and focusing on serving your account holders in a responsible, informative way, you will experience an increase in business and account holder satisfaction.

Protecting income and delivering better service continue to be primary focuses for just about every bank or credit union. The structure of your overdraft program can make all the difference, especially if account holders see the value of the service. Here are three points to ponder:

Do you have a fully disclosed overdraft program?

When changes to Regulation E were implemented back in 2010, banks and credit unions were required to obtain an affirmative opt-in from account holders to charge overdraft fees on debit card point-of-sale and ATM transactions. Educating your account holders about this service goes much more smoothly with a fully disclosed overdraft program.

Are you aware of your real competition?

Your competition is not necessarily other financial institutions in your area. Rather, your competition is what your account holders are using instead of your services to meet their needs. If you charge a reasonable fee that is equal to or less than a car loan late charge or a credit card late fee — and that helps account holders avoid a negative impact to their credit score — they’ll choose your solution. By having a fully disclosed overdraft program that provides account holders with a clear understanding of limits and fees, you can differentiate your bank or credit union from any and all competitive options.

Are your fees reasonable for the service provided?

Account holders will appreciate a value-added service with a reasonable fee that is disclosed at the outset. But they will likely avoid a service with excessive or undisclosed fees. In the end, it will always come back to the importance of looking at your services and fees from the perspective of your account holders. Doing so demonstrates your commitment to providing disclosed value above fees. It also helps to avoid dissatisfaction and disloyalty among account holders and undue pressure for employees to explain the unexplainable.

Dick Miller

Richard Miller joined JMFA after a 23-year career in banking, providing JMFA and their clients a broad base of management experience in community banking, from chief lending officer to president of small and medium-sized financial institutions. For more information on how JMFA can help your institution maximize overdraft income, contact Craig Simmers at 410-990-0172 or email

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