Who's Paying Those Overdraft Fees?

Abstract

One criticism of overdraft credit is that the fees seem borne disproportionately by low-income, Black, and Hispanic households. To investigate this concern, we surveyed around 1,000 households about their overdraft activity. Like critics, we find that these groups do tend to overdraft more often. However, when we control for respondents’ credit scores along with their socioeconomic characteristics, we discover that only their credit score predicts overdraft activity. While it’s not altogether surprising that credit constrained households overdrew more often, it’s noteworthy that socioeconomic characteristics did not help in predicting overdrafts. This more textured picture of overdraft activity helps inform the ongoing debate about overdraft credit and its users.

To view post: https://libertystreeteconomics.newyorkfed.org/2025/05/whos-paying-those-overdraft-fees/

Keywords: overdrafts, overdraft credit, consumer lending

JEL Classification: G5