18% of Consumers Reported Overdrafting Account in December, Rising from 14% in August

Recent polling data from Morning Consult found that nearly one in five consumers with a credit union or bank account—18 percent—reported overdrafting the account in December, up from 14 percent in August. About two-thirds of consumers who overdrafted in December said they paid a fee as a result, which banks have increasingly been under scrutiny for charging.

Several payroll events at the end of the year may have made overdrafting more likely. Employees who are paid biweekly on Fridays have not had a three-paycheck month since July; Halloween fell on a Sunday, so many workers did not receive paychecks for the high-spend weekend until November 5; and Thanksgiving makes it difficult for small and medium-sized businesses to prepare for a Friday payroll, so some workers could have been paid late.

One-third of Millennials reported overdrafting in December, making them the most likely generational demographic to overdraft. They also represented half of adults who overdrafted between August and December, even though they only make up 30 percent of the adult population. 47 percent of overdrafters are parents with children under 18 years old, despite making up 27 percent of the adult population.

Surprisingly, those who overdraft report similar income levels to the general population; they are about as likely to report an income of more than $50,000 and slightly more likely to report an income of more than $100,000. However, overdrafters are more likely to report that their income varies monthly, which contributes to their likelihood of overdrafting.

Banks often spin overdrafts as a service to consumers; for a fee, consumers can receive a short-term loan to help them avoid a declined card or the need for alternative financial services, which overdrafters use at more than twice the rate of the general population. As one example, 21 percent of adults who overdrafted since August reported receiving a payday loan or purchasing a money order through a provider other than a bank or credit union.

Overdrafting services may be harming consumers’ loyalty to their providers, as those who have overdrafted are more likely to consider a new provider within six months.