Consumer advocates estimate that even without counting daily fees, bounce protection costs five times more than using a line of credit, and four times more than a pre-arranged transfer from savings. And if banks were required to disclose the fees as an annual percentage rate of interest on the amount of an overdraft, their figures would translate into APRs of several hundred percent, or even thousands of percent. For instance, a one-time $20 bounce-protection fee on a $100 overdraft that wasn’t paid back to the bank for two weeks amounts to an APR of 520 percent.
“There’s an increased reliance (by banks) on fee income” for profits because “it smoothes out the peaks and valleys that are inherent with interest income,” said Greg McBride, an analyst for Bankrate.com. “There’s been a pretty volatile interest environment over the past ten years.”
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