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February 2011

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Hidden Risks

The Case for Safe and Transparent 

Checking Accounts

April 2011

www.pewtrusts.org/safechecking
Hidden Risks: The Case for Safe and Transparent Check

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Table of Conten

1 Executive S

4 Introd

6 I. Discl

11 II. Overdraf

12 III. Overd

14 IV. Processing of Deposits and

18 V. Dispute Resol

19 VI. The Cost of a Check

22 policy Recommendati

23 Appendix A: Explication of Table 4—Median Fees and Mo

Policies for Checking

25 Appendix B: Metho

29 Endno
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The Case for Safe and Transparent Checking Accounts

Hidden Risks

Executive Su

A checking account is the most basic and necessary financial product for American consumers. 

Nine out of 10 Americans have a checking account, making it the most widely utilized financial 

services product in the United States. The federal government recognizes the importance 

of checking and other deposit accounts by insuring deposits up to $250,000 per account 

against the failure of the bank.1 Checking accounts provide a secure way for Americans to 

collect earnings and make payments, and for many, they serve as the entry to the financial 

mainstream, where savings and credit products are available. As the vehicles for billions of 

transactions each day, checking accounts are essential to the national economy.

This ubiquitous product is at the center of profound changes to our system of transacting. 

Paper checks are increasingly a thing of the past as Americans use debit cards to access 

their checking accounts. The Check Clearing for the 21st Century Act of 2003 (Check 21 Act) 

allowed banks greater freedom to transmit funds electronically and reduced the paper trail 

provided to consumers.2

 Overdraft coverage programs once reserved for occasional use are 

now widespread. These changes are little understood by consumers, and their impact has 

been little studied. Scarce comprehensive data exist on the state of checking accounts in 

today’s modern world.

In October 2010, the Pew Health Group’s Safe Checking in the Electronic Age Project began a 

study of checking account terms and conditions to examine both the state of the marketplace 

and the effect of current regulations covering checking accounts. Pew analyzed more than 250 

types of checking accounts offered online by the 10 largest banks in the United States, which 

hold nearly 60 percent of all deposit volume nationwide. In researching checking accounts, Pew 

charted the median and the range for many fees; the variations in key practices; and the extent 

of certain practices, including some that are the subject of legal challenges (see Table 4).3 

Through this research, we identified five practices that put consumers at financial risk, 

potentially exposing them to high costs for little benefit.

Pew’s findings are as follows:

•	 Banks do not provide important policies and fee information in a concise and easy-tounderstand format that allows customers to compare account terms and conditions

among banks. Pew’s research showed that the median length of bank disclosures for 

key checking account policies and fee information was 111 pages. In addition, the banks 

often used different names for the same fee or service; put the information in different 

documents, different media (Web or hard copy), or different locations in a document; and 

did not summarize or collect key information anywhere.

•	 Accountholders are not provided full information about the respective costs of overdraft

options. All 10 of the banks in the study, for at least some transactions, offered programs—

“overdraft penalty plans”—in which the bank covers overdrafts for a set per-overdraft charge. 

Nine of the 10 banks also offered “overdraft transfer plans” in which the bank transfers funds 

to cover overdrafts in a customer’s checking account from the customer’s savings account, 
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credit card, or line of credit. Customers can also choose not to enroll in any overdraft plan 

to avoid these fees for ATM and point-of-sale (POS) debit card transactions. These plans 

have significantly different features and fees; however, banks are not required to provide full 

information at the time of opt-in about all overdraft options available, including the price for 

lower-cost options.

•	 Bank overdraft penalty fees are disproportionate to the size of the median overdraft

amount. Overdraft fees will cost American consumers an estimated $38 billion in 2011—an 

all-time high.4 The median overdraft amount is $36, yet the median overdraft penalty fee 

is $35. In addition, the majority of checking accounts charged an extended overdraft fee 

after a median of seven days if the fees and principal were not paid. The median extended 

overdraft fee was $25. While banks have to incur a risk that they will not be repaid, most 

institutions manage this by limiting the overdraft amount given to any customer.5 Banks have 

long argued that overdraft penalty fees are not compensation for the cost of overdrafts to the 

bank but rather are designed to deter customers from repeating this behavior. Penalty fees in 

other consumer financial products (e.g., credit cards) are related in size to the violation.

•	 Banks reserve the right to reorder transactions in a manner that will maximize

overdraft fees. Overdraft penalty fees are imposed each time a withdrawal is posted to an 

account with insufficient funds to cover it at that moment. Banks can maximize the number 

of times an account “goes negative” by reordering deposits and withdrawals to reduce the 

account balance as quickly as possible. Posting withdrawals before deposits and posting 

withdrawals from largest to smallest have the effect of maximizing overdrafts. Currently, no 

federal regulation governs posting order.6

 Only two banks in this study, representing 48 

percent of accounts, commit to posting deposits before withdrawals. The rest reserve the 

right to post withdrawals first. As of October 2010, when Pew collected its data, all banks 

studied reserved the right to reorder transactions from highest to lowest amount. Since 

then, a limited number of banks have altered this policy and no longer post all withdrawals 

from highest to lowest for all of their accounts.

•	 More than 80 percent of accounts examined contain either binding mandatory

arbitration agreements or fee-sharing provisions that require the accountholder to pay 

the bank’s losses, costs, and expenses in a legal dispute regardless of the outcome 

of the case.7 Seventy-one percent of account agreements reviewed by Pew require 

accountholders to submit to the decision of a private arbitrator selected by the bank in 

the case of a dispute. An additional 12 percent of checking account agreements in this 

study provided that accountholders have the right to settle their claims in a court, but the 

customer is liable for the bank’s losses, costs, and expenses regardless of outcome. In the 

Wall Street Reform and Consumer Protection Act of 2010, Congress required the newly 

created Consumer Financial Protection Bureau (CFPB) to look at mandatory arbitration in 

contracts for financial products and services and, based on the findings, authorized the 

CFPB to write new rules limiting these clauses.8

Based on these findings, Pew recommends the following policy solutions to protect 

consumers, promote a competitive marketplace, and foster a level playing field among 

financial institutions:

•	 Policy makers should require depository institutions to provide information about checking 

account terms, conditions, and fees in a concise, easy-to-read format, similar to the 

Schumer Box used for credit cards.9
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•	 Policy makers should require depository institutions to provide accountholders with clear, 

comprehensive pricing information for all available overdraft options when a customer is 

considering opting in to a program so that the customer can make the best choice among 

overdraft options, including choosing not to opt in for any overdraft coverage.

•	 Policy makers should require overdraft penalty fees to be reasonable and proportional to the 

bank’s costs in providing the overdraft loan. Furthermore, we suggest that regulators monitor 

overdraft transfer fees and impose similar reasonable and proportional requirements if it 

appears that they are becoming so disproportionate as to suggest that they have become 

penalty fees as well.

•	 Policy makers should require depository institutions to post deposits and withdrawals in a 

fully disclosed, objective and neutral manner that does not maximize overdraft fees, such 

as in chronological order.

•	 The Consumer Financial Protection Bureau, in its study of arbitration agreements, should 

examine the prevalence of binding arbitration clauses; of fee shifting provisions; and 

of “loss, costs, and expenses” clauses in checking accounts and assess whether such 

provisions prevent consumers from obtaining relief.
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Introdu

A checking account is the financial cornerstone for the overwhelming majority of American 

families—often the bank product that provides consumer entry into the financial mainstream. 

Nine in 10 adult Americans have a checking account, representing a significantly larger 

proportion of the population than those holding a mortgage or credit card.10 Millions of 

consumers use bank or credit union checking accounts every day to collect their earnings and 

pay their bills. The federal government, through the Federal Deposit Insurance Corporation 

(FDIC), encourages the use of checking accounts by providing a guarantee that the money in 

them (up to $250,000 per account) is safe even if the bank fails.11 As a result of these factors, 

checking accounts have come to play a vital role in the American economy by facilitating the 

safekeeping and transfer of funds for consumers and offering a gateway to savings and credit 

required for investments such as the purchase of homes and higher education. It is to the 

benefit of banks and consumers, and the nation as a whole, that checking accounts be safe 

and user friendly.

Yet checking accounts lack some important types of consumer protections compared to other 

consumer financial products. For example, credit cards have limitations on the dollar amount 

of late fees and over-the-limit fees.12 In addition, their applications must clearly and concisely 

disclose key terms in what is known as a “Schumer Box” (see Figure 2).13 In contrast, checking 

accounts have neither limitations on fees nor any requirements that critical information be 

presented in a consolidated format.

Regulators are authorized by federal banking laws to reduce risks to consumers in checking 

accounts, but that authority has not been actively utilized.14 Checking accounts are subject to 

disclosure requirements under the Truth in Savings Act and the Electronic Fund Transfer Act.15

However, Pew’s research shows that these requirements have not been effective in producing 

clear and useful information for consumers. In addition, the Electronic Fund Transfer Act and the 

Uniform Commercial Code provide certain dispute rights to consumers.16 The Expedited Funds 

Availability Act governs how long a bank may hold a deposit before posting it to a customer’s 

checking account.17 Despite substantial advances in technology that speed the processing of a 

deposit, the Board of Governors of the Federal Reserve (the Fed) has only recently proposed 

the first update in over 20 years to the relevant regulations.18 Protections are also found in the 

Federal Trade Commission Act (FTCA), which defines “unfair or deceptive acts or practices” 

(UDAP) and allows certain banking regulators to ban such practices, yet no federal agency has 

ever applied these provisions to checking account practices.19

Nine of the 10 banks in our study are currently supervised by the Office of the Comptroller of 

the Currency.20 The Fed, under the FTCA, has the authority to write UDAP regulations governing 

providers of checking accounts and other consumer financial products.21 However, the DoddFrank Wall Street Reform and Consumer Protection Act of 2010 transfers rule-writing authority 

and supervision for all 10 of the banks that Pew examined to the new Consumer Financial 

Protection Bureau (CFPB), and its regulatory reach will include the power to ban those practices 

that are deemed to be “abusive” and “unfair or deceptive.”22 Beyond this broad authority, the 

CFPB is also authorized to write regulations to ensure that the features of any consumer financial 

product or service are fully, accurately, and effectively disclosed.23
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What Does “Abusive” 24 Mean

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 defines as 

“abusive” any act or practice that:

“materially interferes with the ability of a consumer to understand a term or condition of a 

consumer financial product or service; or takes unreasonable advantage of

a) a lack of understanding on the part of the consumer of the material risks, costs, or 

conditions of the product or service;

b) the inability of the consumer to protect the interests of the consumer in selecting or 

using a consumer financial product or service; or

c) the reasonable reliance by the consumer on a covered person [a provider of a 

consumer financial product or service] to act in the interests of the consumer.”

In October 2010, the Pew Health Group’s Safe Checking in the Electronic Age Project began a 

study of checking account terms and conditions to examine both the state of the marketplace 

and the effect of current regulations covering checking accounts. This expansive research 

analyzed more than 250 types of checking accounts offered online by the 10 largest banks in 

the United States, which hold nearly 60 percent of all deposit volume nationwide.25

To evaluate the safety and transparency of checking accounts, Pew sought to quantify both 

the types and size of fees, as well as the important bank policies that Americans are most 

likely to encounter while using their checking accounts. In researching checking accounts, 

Pew charted the median and the range for many fees; the variations in key practices; and 

the extent of certain practices, including some that are the subject of legal challenges.26 Pew 

researchers collected checking account data found both online and in paper copy at bank 

branches (see Appendix B: Methodology).27

From this research, we identified patterns that impose hidden, unnecessary, and potentially 

dangerous risks on consumers. Based on these findings, we segmented this paper into 

five topic areas: disclosure, overdraft options, overdraft fees, processing of deposits and 

withdrawals, and dispute resolution. Potential solutions to undue risks are also indentified.
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I. Disclo

Product information, from nutrition labels on food to dealer stickers on new cars, allows 

consumers to make informed choices when selecting and purchasing goods. In the world of 

consumer finance, disclosure functions as the threshold mechanism to protect consumers. 

Full and accurate transparency in fees and services is essential to keeping consumer markets 

fair for both buyers and sellers. Disclosure is critical to promote competition, which requires 

informed customers who can rationally choose among available products and services.

The checking accounts in this study had a median of 111 pages of disclosure documents, 

consisting of account agreements, addendums to account agreements, fee schedules, and 

pages on the bank’s Web site. Many of these documents are not user friendly, with much 

of the text densely printed, difficult to decipher, and highly technical and legalistic. For an 

excerpt of a disclosure document, see Figure 1.

None of the banks examined collected key information in a single place. Rather, most 

disperse key terms and conditions across multiple lengthy documents of different types, 

making it extremely difficult for consumers to identify and locate the information they need 

when comparing and choosing checking accounts. Further complicating the matter, different 

banks locate the same information in different places. As a result, consumers must navigate a 

confusing maze of disclosure documents in their efforts to locate all of the important account 

information. Pew’s research indicates a need for improved, organized disclosure of the terms 

and conditions of checking accounts.

Only two pieces of information were generally accessible on every account’s Web page: the 

monthly fee and a list of possible ways to avoid the monthly fee. Key terms and conditions such 

as the amount of any overdraft fee or stop payment fee were not available on the account Web 

pages of nine out of 10 banks in the study. As noted in Table 1, Bank of America provided the 

most information for account terms and fees. However, six key terms were not available on any 

of the banks’ account Web pages: the order in which the bank processed credits and debits, 

the overdraft transfer fee, the fee when a bank rejects a check written to the customer for 

nonsufficient funds, dispute restrictions, other service fees, and the deposit hold policy.

Because there is no industry-wide consensus on terminology, different names are used for 

the same fees and stipulations. For example, what this report refers to as an overdraft penalty 

fee was described by different banks variably as an “overdraft fee,” “overdraft item fee,” 

“insufficient funds fee,” “unavailable funds fee,” “overdraft item paid fee,” “unavailable funds 

penalty,” or a “returned/paid items fee.”
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Banks Bank of

America Chase Citibank Capital 

One PNC TD Bank SunTrust

Y

Y

Y

Y

Y

Y

Minimum

Needed to Op

Monthly F

Requirements to 

Waive Monthly F

Interest

Fees at

Proprietary ATM

Fees at

Non-Proprietar

Bank ATM

Overdraft

Penalty F

Maximum Numb

of Overdraft Fee

per Da

Extended

Overdrawn F

NSF

Stop Payment 

HSBC

Table 1: Accessibility of Important Account Informati

Are the most important fees and policies commonly located on each account’s Web page?

Y

YES

YES

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

U.S.

Bank

Wells 

Fargo

Note: Data represent 265 checking accounts offered by the 10 largest American banks by deposit, which collectively hold nearly 60 percent of al

deposits in the United States, and are current as of October 2010. Banks are listed from left to right in order of deposit volume held. This t

shows whether each piece of important account information for consumers, as determined by Pew, was most often located on each account’s Web 

page on the banks’ Web sites. For instance, if the majority of a bank’s account Web pages did not disclose the fee or provision, the corresponding 

box in Table 1 is blank

*A minority of checking accounts in the study provide interest. Data reflect whether the account Web page mentions this feature in any way

**Multiple fees at ATMs may be charged for items such as a statement copy fee. Data here include whether a fee for cash withdrawal is disclose
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Note: This snapshot of text is on page 20 of SunTrust’s “Rules and Regulations for Deposit Accounts.”

Figure 1: Sample Page from a Checking Account Agreeme
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Discussion

Federal regulators have abundant legal authority to prescribe clear and helpful disclosure 

for checking accounts. The Truth in Savings Act (TISA) requires banks to offer a schedule of 

specified terms and conditions for all deposit accounts prior to account opening that must be 

available on demand to consumers so that they can “understand and compare accounts.”28

TISA provides authority to issue regulations, enforce its requirements, and issue model forms 

for disclosure.29 Similarly, the Electronic Fund Transfer Act requires financial institutions to 

disclose the terms and conditions when a consumer signs up for electronic fund transfer 

services, such as an ATM card or a debit card.30 In addition, this act allows regulators to issue 

rules, enforce its requirements, and issue model clauses to facilitate compliance.31

Current regulations leave some gaps that permit the less-than-optimal disclosure observed by 

Pew researchers. Under TISA regulations, banks must disclose the minimum balance required 

to open an account, as well as a schedule of all account fees with the conditions under 

which each fee will be assessed.32 The disclosures must be made “clearly and conspicuously, 

in writing, and in a form the consumer may keep.”33 However, there are no requirements 

pertaining to format or layout (e.g., font size, order, or page length).34 Disclosure can also 

be made in combination with other account terms and other types of accounts.35 Further 

regulations under the Electronic Fund Transfer Act require institutions to disclose fees and 

limitations on electronic fund transfers, as well as a summary of the accountholder’s liability 

for unauthorized transfers.36 In contrast to TISA regulations, the Electronic Fund Transfer Act 

disclosure requirements do not apply to potential customers.37

Disclosures are critical for consumers to make informed decisions, but the information needs 

to be presented in a format that is clear and understandable. They should convey key terms 

and conditions with clarity so that consumers can compare products and make purchasing 

decisions that best meet their needs. Based on the Schumer Box, which provides information 

on these fees and terms for credit cards, Pew has developed a disclosure box to give similar 

information to checking account customers.
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FIGURE 2: Pew’s Model Disclosure Box for Checking Accou

Basi 

Accoun

Opening

and Usag

Overdraf

Options for

Consumers 

with Debit

Cards

Processin

Policie

Dispute

Resolution

Minimum Deposit Needed to Open Account

Monthly Fee

Requirements to Waive Monthly Fee

Interest Rate

ATM Fees

ATM Fees

Non-Sufficient Funds (NSF) Fee

Returned Check Fee

Stop Payment Fee

Account Closing Fee

Other Service Fees

No Overdraft Service 

Overdraft Transfer Fee

Overdraft Penalty Fee

Maximum Number of Overdraft 

 Penalty Fees per Day

Extended Overdraft Penalty Fee

Posting Order

The order in which withdrawals and 

deposits are processed

Deposit Hold Policy

When funds deposited to your account 

are available

Dispute Resolution Agreement

$

$

 Minimum combined account balance, 

direct deposit or other conditions

%

$ for using your bank’s A

$ for using another bank’s A

$ per item

$ per declined check written to your account

$ per item to stop payment for up to  month

$ if account closed within  days of openin

 Please consult the back of this document for a list of

additional service fees.

  If you choose not to opt in to any kind of overdraft servic

transactions that would cause an overdraft will be declined 

at no cost to you.

$ per overdraft covered by transfer from linked savings

account, line of credit, or credit card

$ per overdraft covered by bank advance

$ every Mth day the account is overdrawn, starting

N days after the account is first overdraw

 Summary of policy

 

 

• Cash deposit with teller: x business day

• Cash deposit at atm: x business da

• Check deposit with teller: y business day

• Check deposit at atm: y business da

• Direct deposit: x business day

• Wire transfer: x business day

• If something causes a longer hold on a deposit, the first $200

of that deposit will be made available either the same 

business day of the deposit or the next business day.

• Funds from non-bank checks may take an extra business day

to become available.

 A “business day” is a non-holiday weekday. The 

end of a business day varies by branch, but it is no 

earlier than T p.m.

 Summary of agreement

Option A: 

(Default)

Option B:

Option C: 

Overdraft 

Penalty 
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II. Overdraft

Currently, there are two main categories of overdraft products. Because banks describe these 

using dissimilar terms, for the purposes of this report, “overdraft penalty plans” are defined 

as short-term advances made for a fee by the bank to cover an overdraft. On the other hand, 

“overdraft transfer plans” involve a transfer from another account or plan, either a savings 

account, credit card, or overdraft line of credit, to pay for any overdrafts. Customers must 

affirmatively sign up for such plans and establish the second account.

Overdraft Penalty Pl

Every checking account analyzed offered an overdraft penalty plan for at least some 

transactions. Under such plans, when a customer’s withdrawal or purchase exceeds the 

checking account balance, the bank has the discretion to allow the transaction and pay—for 

a fee—the overdraft via a short-term advance; however, the bank is not obligated to cover 

any overdrafts. If the bank covers the transaction, the customer must repay both the overdraft 

amount and the fee in a short period of time—usually less than a week—or incur another fee 

known as an extended overdraft fee.

As of August 15, 2010, financial institutions must obtain the affirmative consent (known as 

opt-in) of customers before enrolling them in an overdraft penalty plan that covers debit 

card transactions at points-of-sale and ATMs.38 If a customer does not opt in, any debit card 

transactions that overdraw the account will be denied with no fee charged. However, banks 

can apply overdraft penalty plans for overdrafts by checks and deductions made through the 

Automated Clearinghouse (ACH) network without obtaining affirmative customer consent.

Two of the banks included in this study, Bank of America and Citibank, have publicly indicated 

that they will not charge overdraft penalties on either debit or ATM transactions.39 While Bank 

of America specifically states this in its account disclosures, Pew researchers were unable to 

find similar explicit disclosure in the Citibank “Client Manual.”40

Overdraft Transfer Pla

Nine of 10 banks studied (representing 98 percent of accounts) offered overdraft transfer 

plans. In such plans, if a customer makes a transaction that overdraws his or her checking 

account, the bank arranges for the payment of that transaction by transferring money to 

the customer’s checking account from the customer’s linked savings account, credit card, or 

overdraft line of credit. The bank charges a fee for processing this transfer of funds.

Discussion

Pew research shows that, while overdraft transfer plans require accountholders to set up 

a linked account, they may be a preferable choice for most consumers because (1) the 

fee per overdraft is less than an overdraft penalty fee (a median of $10 as opposed to a 

median of $35); (2) there is no risk of extended overdraft fees since the overdraft itself is 

repaid immediately; (3) the bank must cover the overdraft if there are sufficient funds in the 

linked account and if the maximum number of permissible transfers has not been previously 

exceeded; and (4) for transfers from overdraft lines of credit and credit cards, the consumer 

is generally permitted a longer timeframe to repay the credit and may sometimes do so in 

installments.41

The Fed has recently enacted rules that prohibit banks from charging overdraft penalty fees 

on ATM and POS debit cards unless the individual has opted in. While no current regulation 

requires that comprehensive information about all available overdraft options (including 
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fee amount) be provided at the time the accountholder seeks overdraft coverage, financial 

institutions that offer overdraft penalty plans must provide a form that discloses these options. 

The customer must agree to the terms and sign the form in order to opt in.42 The Fed’s model 

opt-in form describes overdraft penalty plans as the “standard overdraft” option and only 

briefly mentions the existence of other alternatives. While a description of price and the 

circumstances under which the overdraft penalty fee will be assessed is included, the model 

form does not include the price of overdraft transfers.43 In addition, the Fed’s form does not 

discuss the option not to opt in to overdraft coverage, a choice that would allow customers to 

avoid exceeding their available balance or incurring any overdraft fees. The Fed could modify 

this form to require additional disclosure regarding overdraft transfer plans.

III. Overdr

Overdraft Penalty 

When a bank uses an advance to cover a transaction that would overdraw a checking account, 

it charges an overdraft penalty fee. Pew’s research found that the median overdraft penalty 

fee was $35, with a range of $10 to $36.

The FDIC’s research shows that the median overdraft amount is $36.44 If the median overdraft 

penalty fee of $35 is applied to a $36 overdraft with a repayment period of seven days, the 

APR, or annual percentage rate, on the typical overdraft would be over 5,000 percent—a 

costly way to address credit needs.45

Maximum Number of Overdraft Penalties pe

Nine out of 10 banks (representing 98 percent of accounts discussed herein) put a limit on the 

number of overdraft penalty fees charged to a customer on a given day. Banks may choose 

to decline additional overdraft transactions that exceed this daily limit. The median cap on 

overdraft penalties per day for the studied accounts was four, with the range being three to 

six overdrafts per day. Under this system, median overdraft penalty fees of $35 thus make it 

possible for a customer to be charged $140 or more per day. The 10th bank sets no cap on 

overdraft penalty fees per day.

Extended Overdraft Penalty

If a customer’s account remains overdrawn for a specified number of days, banks will charge 

an extended overdraft penalty fee for every given number of days that the account remains 

overdrawn, meaning that a single overdraft in a penalty program can trigger multiple fees if 

not repaid promptly. Banks also refer to these fees as “sustained” or “continuous” overdraft 

fees. Six of the 10 banks examined (representing 45 percent of accounts) charged extended 

overdraft fees.

The median extended overdraft penalty fee was $25, with the fee varying among accounts 

from $7 to $36. The median number of days that an account must be overdrawn in order 

to begin incurring extended overdraft penalty fees was seven days. Thereafter, the median 

interval number of days before the next extended overdraft penalty fee could be charged was 

also seven days, with a range of five to 10 days.

One bank (two percent of accounts) capped the cumulative total of extended overdraft 

penalty fees that a customer could accrue in one continuous period at $98. However, it 

started charging a $7 extended overdraft fee after only four days, charging a fee every day 

the account remained overdrawn up to the $98 cap. In this scenario, a customer could be 
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charged an overdraft penalty fee and a subsequent $98 in extended overdraft fees for only a 

single overdraft violation.

Overdraft Transfer F

The median overdraft transfer fee was $10. These fees ranged from $5 to $20. Because the 

overdraft is repaid immediately using an accountholder’s own funds under this plan, the 

customer incurs no extended overdraft fee.

Maximum Number of Overdraft Transfers per

For those overdraft transfer plans in which the linked account is a savings account, there 

are restrictions on the number of transfers allowed under federal law. Regulation D (Reg. D) 

limits electronic withdrawals (i.e., those not made at a teller or an ATM) to six per month or 

statement cycle.46 For overdraft transfer plans in which the linked account is a credit card or 

line of credit, the maximum number of overdraft transfers in a given period, if there is one, 

varied according to the terms of the specific account agreement for the linked account.

Non-Sufficient Funds

All banks disclosed a Non-Sufficient Funds (NSF) fee. If a customer attempts to make a check 

payment that would overdraw his or her account, and if the bank chooses not to cover this 

attempted transaction, then the bank will charge the customer an NSF fee. However, if a 

customer has an overdraft transfer plan, an NSF fee is triggered only if the check amount 

exceeds what is available from the linked accounts. The median NSF fee was $35, with a 

range of $10 to $36.

Discussion

Overdraft fees and practices cost consumers billions of dollars every year and put many at 

risk for loss of their checking accounts.47 Two academic studies conducted in 2008 found 

that virtually all involuntary checking account closures are the result of too many instances 

of the consumer’s account being overdrawn.48 Regulators have noted this risk as well. In its 

November 2010 Overdraft Payment Supervisory Guidance, the FDIC stated: “Extremely high 

costs in comparison to the overdraft benefit and/or permitting product over-use often result in 

customer dissatisfaction and complaints. Serious financial harm can result for consumers with 

a low or fixed income.”49

Neither the number nor the amount of overdraft penalty fees is limited by UDAP protections.50

Moreover, there are no federal regulations stating when an extended overdraft fee for the 

same transaction can be imposed.51 Of the banking regulators, the FDIC has taken the lead in 

addressing overdraft fees. The FDIC’s November 2010 guidance to its member banks advised 

them to contact customers who overdraw their accounts six times in a 12-month period to 

discuss alternate options to overdraft penalty plans, such as overdraft transfers, small-dollar 

loans or opting out of overdraft penalty plans.52 In 2005, the Office of Thrift Supervision (OTS) 

provided similar guidance to savings and loan institutions, though it stopped short of specific 

guidelines for when accountholders should be contacted.53 To date, other regulators have not 

followed suit with promoting alternate options. Indeed, none of the banks in the Pew study 

are supervised by the FDIC or OTS, so their guidance does not apply to them.

Unpredictable and repeated overdraft fees pose particular dangers to those who maintain 

smaller balances with less of a cushion to absorb unexpected charges. While many 

accountholders have an occasional overdraft, research by the FDIC and others indicates that a 

relatively small group of consumers regularly incurs overdrafts.54 These customers tend to be 

new entrants to banking—young persons and low- and moderate-income individuals—exactly 
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those who can least afford substantial overdraft fees.55 Previous Pew research demonstrates the 

risks that overdraft penalty fees pose for low-income individuals. Pew’s study of economically 

poor areas of Los Angeles found that “fully 18% of the [consumers who] banked in the Los 

Angeles neighborhoods surveyed incurred insufficient funds or overdraft fees three or more 

times in the past year. Of those who have overdrafted their account, nearly three-quarters (72%) 

‘did not know they were out of money’ at the time.”56

Overdraft fees far exceed the incremental cost to the bank of providing this service since 

these transactions, designed to be paid back with the customer’s next deposit, pose minimal 

credit risk. Yet banks maintain that overdraft penalty fees are just that—penalties—and are 

meant to deter customers from overdrafting.57 However, if the point is to deter customers 

from exceeding their account balance, the most direct way to do this is to simply deny the 

overdraft itself.

Other such penalty fees in the consumer financial arena are subject to a reasonable and 

proportional standard.58 For example, the Credit Card Accountability Responsibility and 

Disclosure Act of 2009 (Credit CARD Act) addressed the size of penalty fees in credit cards 

by requiring that the fees be “reasonable and proportional” to a cardholder’s act or omission 

and prohibiting multiple fees for the same transaction.59 Pursuant to that mandate, the Fed 

has issued rules restricting credit card penalty fees, with some exceptions, and provided 

a “safe harbor” of the lesser of the amount of the violation or a limit of $25 for the first 

transgression.60 While not mandatory, this regulatory safe harbor provides a model attractive 

to credit card companies seeking certainty that their fees will be approved by regulators and 

upheld by courts.

Overdraft transfer plans generally are better products for consumers since they help them 

live within their means and cut off the potential for a cycle of debt. However, rising overdraft 

transfer fees disincentivize savings and push customers into overdraft penalty plans. These 

trends could be worsened if overdraft penalty fees are regulated while transfer fees are not. 

Transfer fees are already high: $10 can be considered an excessive charge for a consumer to 

access his or her own money, and as such it is hard to justify this as the incremental cost of the 

service to the bank.

IV. Processing of Deposits and 

Transactions presented on a given day for posting are frequently processed in an order 

different from that in which they occurred. Such a reordering can greatly impact the overdraft 

fees incurred by consumers. Pew’s research shows that, in October 2010, only one of the 10 

banks studied, representing less than five percent of accounts, informed accountholders of 

the order in which all debits and credits are posted.

Two of the 10 banks studied (representing 48 percent of accounts) informed customers that 

they process credits before debits for that day. The other eight reserved the right to process 

debits before credits. Of these, two (representing 20 percent of accounts) explicitly reminded 

customers that the posting order was at the bank’s discretion, and six (32 percent of accounts) 

failed to disclose their debit-credit processing order, implicitly retaining the right to post 

debits before credits.

As of October 2010, when Pew collected its data, all banks and all accounts in Pew’s study 

reserved the right to process all debits presented in a given day from highest dollar amount 
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to lowest dollar amount. Since that time some banks have begun disclosing changes to their 

practices. For example, Wells Fargo, Chase, and Citibank disclosed that they would no longer 

reorder certain types of transactions for at least a portion of their accounts.61 A recent court 

ruling required Wells Fargo to change its policy on deposit sequencing. Pursuant to a court 

order arising from the California case Gutierrez v. Wells Fargo, Wells Fargo has stated that 

it will now process ATM and debit card transactions from low to high for accounts in that 

state. Wells Fargo has indicated that beginning in May 2011, it will post most transactions 

chronologically or low to high for all accounts. Chase Bank also updated its posting order 

policy for all of its accounts and disclosed that it processes debits “in the order in which they 

were authorized, withdrawn, cashed, or deposited, as appropriate. When this is not possible 

because of the bundling of transactions, the posting order will be from highest to lowest 

amount.”62 It has been reported that as of July 2011, Citibank will begin clearing smaller 

checks before larger ones.63

Discussion

Currently, there are no federal regulations that govern the order of posting among 

transactions processed on the same day. There is no legal requirement that banks post 

deposits before withdrawals, nor any law or regulation governing the order in which they 

post either debits or credits.64 Some banking regulators have chosen to advise the financial 

institutions under their jurisdiction on best practices regarding transaction posting procedures. 

However, this guidance does not constitute comprehensive federal regulation. The FDIC’s 

November 2010 overdraft guidance states that FDIC-member banks should review their 

checking procedures to “ensure they operate in a manner that avoids maximizing customer 

overdrafts and related fees through the clearing order.”65

Only one of the banks in our study explicitly stated the order in which it posts all transactions 

(both debits and credits) for some, if not all, accounts. For those who do not have accounts 

with this bank, even the most careful accountholders cannot predict or control the fees 

resulting from hidden posting order practices.66

Posting orders that maximize overdraft fees, especially those that post withdrawals from 

largest to smallest (for an example, see Table 2), continue to be the subject of numerous 

court challenges as an unfair and deceptive practice under state laws.67 Plaintiffs argue that 

the practice enriches the bank at the expense of consumers who receive no benefit from the 

reordering of their daily debits or credits.68 In response, banks have argued that customers 

prefer the largest withdrawals to be posted first because these are the most important (e.g., 

rent or mortgage payments) and, therefore, the transactions that one wants to have paid 

first.69 However, by opting in to overdraft coverage, the customer has expressed the desire to 

have all overdrafts covered regardless of size.
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High-to-Low Posting: Chronological Posting

How the bank ordered transactions How the transactions actually occurred

 DATE RANSACTION  DESCRIPTION 

10/5 Starting Balance $316.90 10/5 Starting Balance $

10/5 – 5 Return of Autozone 10/5 – 1 Debit card purchase at 

purchase $17.23 Subway Restaurant –$11.27

 $334.13 $305.63

10/10 – 1 Online transfer of funds to 10/5 – 2 Debit card purchase at

another account –$80.00 Autozone –$47.99

 $254.13 $257.64

10/6 – 3 ATM withdrawal at a 10/5 – 3 Debit card purchase at

Non-Wells Fargo ATM –$22.00 Autozone –$17.23

 $232.13 $240.41

10/6 – 4 Non-Wells Fargo ATM fee 10/5 – 4 Debit card purchase at

 –$2.00 Autozone –$3.23

$230.13 $237.18

10/7 – 1 Debit card purchase at 10/5 – 5 Return of Autozone 

Albertsons Supermarket –$74.39 purchase $17.23

 $155.74 $254.41

10/10 – 2 Check #1103 10/6 – 1 Debit card purchase at

 –$65.00 IHOP Restaurant –$26.51

 $91.74 $227.90

10/5 – 2 Debit card purchase at 10/6 – 2 Debit card purchase at

Autozone –$47.99 Farmer Boys Restaurant –$8.10

 $42.75 $219.80

10/6 – 1 Debit card purchase at 10/6 – 3 ATM withdrawal at a

IHOP Restaurant –$26.51 Non-Wells Fargo ATM –$22.00

 $16.24 $197.80

10/5 – 3 Debit card purchase at 10/6 – 4 Non-Wells Fargo ATM fee

Autozone –$17.23 –$2.00

 -$0.99 $195.80

 Overdraft Penalty Fee 10/7 – 1 Debit card purchase at 

 –$22.00 Albertsons Supermarket –$74.39

–$22.99 $121.41

10/5 – 1 Debit card purchase at 10/10 – 1 Online transfer of funds to

Subway Restaurant –$11.27 another account –$80.00

 –$34.26 $41.41

 Overdraft Penalty Fee 10/10 – 2 Check #1103

 –$22.00 –$65.00

 –$56.26 –$23.59

10/6 – 2 Debit card purchase at Overdraft Penalty Fee

Farmer Boys Restaurant –$8.10 –$22.00

 –$64.36 10/10 Final Balance –$45.59

 Overdraft Penalty Fee

 –$22.00 

 –$86.36 

10/5 – 4 Debit card purchase at 

Autozone –$3.23 

 –$89.59 

 Overdraft Penalty Fee

 –$22.00 

10/10 Final Balance –$111.59 

 

 Total Cost of Overdraft Fees –$88.0

Note: Data in this chart were taken directly from the opinion in Gutierrez v. Wells Fargo Bank. The left column illustrates how Wells Fargo was able

to charge Ms. Gutierrez four overdraft penalty fees (a total of $88) through manipulating the posting order to deplete her balance more quickly. The 

right column shows what the balance would have been had the transactions been posted chronologically. In the second scenario, Ms. Gutierrez would 

have been charged only a single $22 overdraft penalty fee.70

Table 2: From Gutierrez v. Wells Fargo

The Effect of High-to-Low Posting Ord

 Total Cost of Overdraft Fees –$22.
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Some courts have dismissed similar cases on the basis that state laws do not apply to 

national banks.71 However, in Gutierrez, the federal court in California rejected this argument 

of preemption and applied state law to find that Wells Fargo’s large-to-small posting order 

for debit card transactions was an unfair and deceptive practice.72 The court also rejected 

the “consumer preference” argument, holding that the bank was required to cover the vast 

majority of the debit card transactions at issue regardless of the amount, as it had already 

authorized the purchase.73 Other pending actions under several state laws have been 

consolidated in the Southern District of Florida.74 All 10 banks in the Pew study are or were 

defendants in the ongoing case.

In order to allow accountholders to track their balances and manage their spending, 

transactions should be processed in a predictable manner that responsible customers can 

follow. Posting order should be objective and neutral rather than designed to maximize fees. 

All transactions should be posted in an order clearly disclosed by the bank as part of the 

consolidated pre-account opening disclosure discussed previously in this report.

One option that would establish policy principles and provide regulatory certainty for banks 

would be a transparent system of “safe harbors,” such as has been used in other financial 

services regulations.75 In this case, bank regulators could create a safe harbor posting protocol 

to apply to all depository institutions and presumptively insulate those following it from 

liability and regulatory scrutiny.76

Such a model could be structured to be both objective and fair, without the effect of 

maximizing overdraft fees. For example, a standard of chronological posting order is neutral 

and transparent to both banks and consumers. The safe harbor protocol also could reflect the 

technical demands of different types of transactions. Bank systems can recreate chronological 

order for any transaction with a time stamp, but a different neutral and objective protocol for 

items lacking a unique time stamp could be used, such as by check number.
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V. Dispute Resolu

All 265 accounts examined had some kind of dispute resolution restriction clause in their 

agreements that limited the options available to a customer seeking to enforce his or 

her rights under the bank’s terms. The overwhelming majority of these, 255 accounts 

(representing eight out of 10 banks), required the accountholder to waive the right to 

trial by jury. For 189 of these accounts (representing four out of 10 banks and 71 percent 

of all accounts), the accountholder had to waive the right to a trial before a judge and 

agree to have the dispute resolved before a private arbiter of the bank’s choice. One bank 

(representing six percent of accounts) required customers to accept binding arbitration if they 

did not explicitly opt out in writing within 45 days of account opening.

On top of these restrictions of consumers’ legal rights, six banks (representing 19 percent 

of accounts) include fee-shifting provisions in their account contracts. If these clauses were 

enforced as written, a customer who prevailed against a bank would theoretically end up 

paying the bank for the results of that win.

Pew’s research shows that Bank of America places the fewest restrictions on customers’ access 

to legal remedies. This bank allowed customers to go before a judge and did not disclose any 

fee-shifting agreements.

Discussion

Nearly three-quarters of the accounts in this report (189 out of 265) included mandatory 

arbitration clauses that prevent customers from going to court to settle a dispute. Some 

academics and advocates have criticized these arbitration agreements and their administration 

as biased in favor of industry.77

The Federal Arbitration Act generally makes arbitration agreements valid as a matter of 

federal law. However, some arbitration agreements have been challenged under the laws of 

several states that prohibit “harsh, one-sided, and oppressive” terms in so-called “contracts 

of adhesion” (i.e., contracts that are not freely negotiated).78 Recently, the U.S. District Court 

for the Southern District of Florida struck down the arbitration agreements of several banks 

Table 3: Dispute Resolution Provisi

How do banks restrict customers’ access to courts in the case of dispute?

Percentage of Accoun

96%

94%

71%

12%

Checking Account Dispute Resolution Ter

Customer waives right to jury tria

Customer waives right to class actio

Customer required to enter binding mandatory arbitration agreement

Customer must pay the bank’s losses, costs, and expense

Note: Data represent 265 checking accounts offered by the 10 largest American banks by deposit, which collectively hold nearl

60 percent of all deposits in the United States. Most accounts disclose more than one dispute resolution restrictio
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because they were buried in single-spaced, small-print, boilerplate language and had terms 

such as limits on class actions and cost-shifting clauses that would prevent a plaintiff from 

hiring a lawyer.79

Finally, some banks in our study allowed customers to take them to court but required the 

customer to pay the bank’s “loss, costs, and expenses” regardless of the outcome. While 

fee-shifting agreements like these are usually held unenforceable against prevailing parties, 

they have the effect of chilling the ability of consumers to enforce the account agreement.80

FIGURE 3: A “Loss, Costs, and Expenses” C

—From the PNC Account Agreement

The Wall Street Reform and Consumer Protection Act of 2010 requires the CFPB to study and 

report to Congress on the use of arbitration agreements in financial products and services.81

Based on this research, the CFPB is authorized to prohibit or impose limitations on these 

agreements should it find that to do so protects consumers and is in the public interest.82

VI. The Cost of a Checki

For this report, Pew tracked bank practices regarding the cost of the important fees and the 

terms of the key policies included in the model disclosure box in Figure 2. Table 4 summarizes 

Pew’s findings on this data collected from the checking accounts offered by the banks 

included in this study.
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a

Median Length of Disclosures 111 pages

Account

Minimum Amount Needed to Open Account 

Monthly Fee $8.95

Minimum Combined Account Balance 86% of accounts waived a monthly fee with a minimum balanc

to Avoid Monthly Fee $2,500 median minimum combined account balanc

Direct Deposit to Avoid Monthly Fee 43% of checking accounts with a monthly fee waived that fee if th

customer had a recurring direct deposit.

 Interest N

Non-Proprietary Bank ATM Fees $2 per transac

 Non-Sufficient Funds (NSF) Fee $35 per

Returned Check Fee $12 per declined check written to the customer’s accoun

 Stop Payment Fee $29 per item to stop payment for up to six mont

 Account Closing Fee 

 Other Service Fees 40 the median number of additional service fees, ranging f

$1.50 to $175.00

Overdraft O

 Overdraft Penalty Fee $35 per item covered by bank advan

Maximum Number of Overdraft 4 Penalty Fees per D

 Extended Overdraft Penalty Fee $25 every seventh day the account is overdr

 Overdraft Transfer Fee $10 per transfer from linked savings account, line of credit or credit c

 No Overdraft Service for Point-of-Sale If a customer chooses not to opt in to any overdraft servi

(POS) Debit and ATM Transactns   these transactions, those that would cause an over

(Default Option) will be declined at no cost

Processing Pol

Posting Order* (The order in which deposits All banks reserved the right to reorder withdrawals from highest 

and withdrawals are processed) lowest for all their accounts. 

52% of accounts reserve the right to post withdrawals before deposits.

Deposit Hold Policy (How soon funds ar  • Cash deposit with teller/ATM: Same business d

available after they are deposited) • Check deposit with teller/ATM: Next business day

• Direct deposit/wire transfer: Same business day

 A “business day” is a non-holiday weekday. The end of a 

 business day varies by bank and by branch, but it is no 

 earlier than 2:00 p.m.

Dispute Resolut

Dispute Resolution Restrictions 100% of accounts restricted customers’ rights to settle legal disputes.

71% of accounts had mandatory arbitration agreements. 

12% of accounts might have allowed customers to take the bank to

court but required the customer to pay any “loss, costs, and

expenses” the bank incurs.

Note: Data represent 265 checking accounts offered by the 10 largest American banks by deposit, which collectively hold nearly 60 percent of al

deposits in the United States as of October 2010. See Appedix A for an explanation of these fees and terms. All numbers are medians and al

represents the most common versions of important account provisions. 

*As of the publication date, a limited number of banks have indicated they will no longer reorder some transactions for at least a portion of their accounts

Table 4: Median Fees and Most Common Policies fo

Checking Accounts as of October 2010

What does the median checking account look like?
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conclusio

Pew’s research shows that it is exceedingly difficult for an average American to find the basic 

information needed to either select a checking account or to responsibly manage his or 

her existing account. Assembling information from over 100 pages of disclosure materials 

represents a daunting task, even for the most financially savvy consumer. Such deficiencies 

call for action that requires depository institutions to disclose fully and clearly key checking 

account terms, policies, and fees in a concise, consolidated format.

Furthermore, consumers must be provided with complete and unbiased information in 

regards to overdraft options. Accountholders should not be subjected to unrestrained 

overdraft fees or to hidden practices that maximize overdrafts. Overdraft fees, like other 

penalty fees, should be responsible and proportional to the bank’s cost. Posting order should 

be objective, neutral, and clearly disclosed, and should not be used to maximize overdraft 

fees. Finally, the CFPB, in its study of binding arbitration clauses, should include a thorough 

examination of clauses that purport to make accountholders liable for the bank’s costs 

regardless of the outcome of the case.

The free market system is predicated on the idea of competition. Increased disclosure, 

presented in an understandable format, helps create a better-functioning marketplace by 

allowing consumers to compare prices and features. Potential customers have the opportunity 

to preview terms and conditions for some financial products. For example, credit cards are 

required by law to disclose key terms and conditions in an easy-to-read format (the Schumer 

Box) before a potential customer applies for a card. Similarly, mortgage originators are 

required to provide families considering the purchase of a home with a good faith estimate.

We encourage similar transparency in checking accounts that will stimulate a healthier 

marketplace for consumers and banks alike. Amending and simplifying this process is essential 

for competition to thrive.
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Policy Recommendat

Pew recommends the following policy solutions to address the findings of our study. While 

industry can make these changes voluntarily, policy makers should create a level playing field.

Disclosu

Policy makers should require depository institutions to provide information about 

checking account terms, conditions, and fees in a concise, easy-to-read format, similar to 

the Schumer Box used for credit cards. Pew has developed a disclosure box (Figure 2) as 

a model for providing such information to consumers.

Overdraft 

Policy makers should require depository institutions to provide accountholders with clear, 

comprehensive pricing information for all available overdraft options when a customer 

is considering opting in to a program so that the customer can make the best choice 

among overdraft options, including choosing not to opt in for any overdraft coverage.

Overdraft

Policy makers should require overdraft penalty fees to be reasonable and proportional to 

the bank’s costs in providing the overdraft loan. Furthermore, we suggest that regulators 

monitor overdraft transfer fees and impose similar reasonable and proportional 

requirements on them if it appears that they are becoming so disproportionate as to 

suggest that they have become penalty fees as well.

Processing of Deposits and Wit

Policy makers should require depository institutions to post deposits and withdrawals in 

a fully disclosed, objective and neutral manner that does not maximize overdraft fees, 

such as in chronological order.

Dispute Resoluti

The Consumer Financial Protection Bureau, in its study of arbitration agreements, should 

examine the prevalence of binding arbitration clauses, of fee-shifting provisions, and 

of “loss, costs, and expenses” clauses in checking accounts and assess whether such 

provisions prevent consumers from obtaining relief.
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Appendix A: Explication of Table 4—Median Fe

Most Common Policies for Checki

Checking accounts come with a wide range of fees, terms, and conditions. For the purposes 

of this report, Pew has grouped all pricing and policy information into four categories that 

reflect how customers use their accounts:

•	 Account Opening and Usage

•	 Overdraft Options

•	 Processing Policies

•	 Dispute Resolution

Account Opening and 

Like any consumer product or service, there are costs to the customer for opening and 

maintaining checking accounts. The fees and policies assessed in this section are ones that a 

customer is likely to deal with on a day-to-day basis, even if he or she has not overdrawn his 

or her account or entered into a legal dispute with his or her bank.

Minimum Deposit Needed to Open Ac

Eight out of 10 banks (91 percent of accounts) required some minimum deposit to open an 

account. Among all of the accounts analyzed, the median minimum deposit needed to open 

an account was $100. The minimum opening balance ranged from $0 to $500.

Monthly F

Eighty-seven percent of examined checking accounts disclosed a monthly maintenance fee 

that the bank may charge customers at the end of every statement cycle. Only 13 percent of 

accounts (35 out of 265) had no monthly fee (commonly called “free checking”). The median 

monthly fee for checking accounts was $8.95. Across all accounts that charged a monthly fee, 

this fee ranged from $3 to $50.

Bank-Provided Information on Requirements to Waive Monthl

While most checking accounts in our study had a monthly fee, the vast majority of these (228 

accounts out of 230) also had provisions that allowed the fee to be waived if the customer met 

certain requirements. These requirements varied from account to account. The two most common 

ways for a customer to avoid paying a monthly fee were by maintaining a minimum combined 

account balance or by having a recurring direct deposit. A few banks allowed customers to not 

incur such a fee by using electronic banking rather than in-person or paper services.

Minimum Combined Account Balance

Eighty-six percent of the accounts analyzed that had a monthly fee (198 of 230 such 

accounts) waived that fee if the customer maintained a minimum combined account 

balance. For this purpose, banks generally look at the combined account balance for all 

of the customer’s deposits, loans, and investment balances with that bank. Depending 

on the institution and the particular checking account, this balance can include a 

customer’s checking account, savings account, mortgage, credit cards, lines of credit, 

money market account, certificates of deposit, or other accounts. The median minimum 

combined account balance needed to avoid a monthly fee was $2,500. The lowest 

instance of this requirement was $100, and the highest instance was $100,000.
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Recurring Direct Deposit

A recurring direct deposit is an electronic ACH transfer of funds into a consumer’s 

account at least once every statement cycle. Examples include payroll checks or benefits 

such as Social Security. Of the 230 checking accounts studied that had a monthly fee, 

100 of them (43 percent) waived their monthly fees if the customer had a recurring direct 

deposit. Two banks (33 percent of accounts with a monthly fee) disclosed a required 

minimum direct deposit dollar amount in order to qualify for the waiver. The median 

direct deposit required by these banks was $100, with a range of $25 to $250 among 

their accounts.

Other Ways to Avoid Monthly Fees

While maintaining a minimum combined account balance or having a recurring direct 

deposit were the two most common ways that banks allowed a customer to avoid a 

monthly fee, several accounts had other unique requirements for waiving the charge. 

In the accounts in our study, these focused on the customer’s use of electronic banking 

mechanisms rather than in-person or paper-based services.

For example, customers who have Bank of America’s eBanking accounts can avoid 

a monthly fee if they use only self-service options (ATM, online, mobile) for deposits 

and withdrawals and receive only paperless statements. Citibank disclosed that it will 

waive the Basic Checking monthly fee if the customer makes at least five qualifying 

transactions per statement cycle, with “qualifying transactions” defined as POS debit; 

check debit; bill payment via telephone, online, or mobile banking; auto deduction/ACH 

payment; or an ATM cash withdrawal.

Interes

Although traditionally one distinguishing difference between checking and savings accounts 

was that the latter allowed the customer to accrue interest on his or her deposits, a large 

number of checking accounts examined also offered the customer the opportunity to receive 

interest on his or her deposits. In fact, 109 out of 265 checking accounts studied (41 percent) 

were interest bearing.

Fees at Non-Proprietary

All banks studied allowed their checking account customers to use their banks’ own ATMs 

without charging a fee for almost all transactions except for an account statement request. 

Banks did not disclose if the report is provided as a printed copy or an on-screen display. 

However, eight out of 10 banks and 90 percent of accounts charged their customers a fee for 

using an out-of-network ATM. The median fee for using another bank’s ATM was $2. For those 

banks that charged this fee, it ranged from $2 for some accounts to $2.50 for other accounts. 

The non-proprietary ATM fee charged to the customer by his or her bank is in addition to any 

fees charged to the customer by the owner of that non-proprietary ATM.

Returned Check Fe

If a customer attempts to deposit a check into his or her checking account and the check 

does not clear, all of the banks studied charged the depositing customer a returned check 

fee. The median returned check fee for all accounts was $12, with a range of $10 to $40 

among all accounts.

Stop Payment 

If a customer asks his or her bank to halt the processing of a check written by the customer 

(and the resulting withdrawal of funds from his or her checking account), the bank will 

generally do so for a period of time and charge the customer a stop payment fee. The median 
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stop payment fee was $29. For those accounts that charge a stop payment fee (92 percent of 

accounts), the fee ranged from $25 to $50. The stop payment orders for nine out of 10 banks 

(97 percent of accounts) lasted six months but were renewable for a repeat fee.83 The one 

remaining bank’s stop payment period was one year.

Account Closing F

Six out of the 10 banks examined (representing 38 percent of accounts) charged a fee if a 

customer closed his or her account within a specified and relatively brief period of time after 

the initial opening of the account. Among the banks charging a fee, this fee ranged from $20 

to $30, and the period of time ranged from within 90 to 180 days of opening the account.

Other Service F

While this report considers nine different fees in depth, it should be noted that checking 

accounts have other associated fees. The median account had 40 other service fees beyond 

those discussed here, while some accounts had as few as seven and some had as many as 54. 

These fees, usually disclosed on fee schedule documents, ranged in cost from $1.50 to $175. 

They included such diverse charges as the “Staff Assisted Requests for Any Item or Statement 

Copy” fee, the “Foreign Check Clearing Services for up to US $5,000 Drawn from Canadian 

Banks” fee, the “Online External Transfer to Your Accounts at Other Financial Institutions” fee 

and the “Large Amount of Coins Deposited” fee.

Appendix B: Method

Table 5: List of Banks Reviewed by

Bank

Percentage of

Total U.S. Deposi

Held by Ban

Value of

Deposits in Ba

13.3%

12.1%

11.1%

11.1%

2.5%

2.4%

1.7%

1.6%

1.6%

1.6%

59%

$976,953,347,000

$887,805,000,000

$816,409,000,000

$813,951,000,000

$183,123,000,000

$178,875,108,000

$128,177,056,000

$118,668,103,000

$117,331,543,000

$116,679,948,000

$4,337,973,105,000

Bank of America

JP Morgan Chase

Wells Fargo

Citigroup

U.S. Bank

PNC

TD Bank

Sun Trust

Capital One

HSBC

Total

Note: Data on deposit volume are from Payments Source, a self-reported banking industry database

and are current as of October 6, 2010. The table shows the percentage of all deposits in the Unit

States held by these 10 banks and the value of those deposits
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Data Collect

Through this and future research documenting checking account practices, the Pew Health 

Group’s Safe Checking in the Electronic Age Project seeks to provide information and 

recommendations to support the development of sound policy, regulatory, and business 

decisions.

Data in this report are based on an analysis of checking account agreements, Web page 

documentation, and fee schedules posted online by the largest 10 banks as identified by their 

holding companies’ deposit volume as of October 2010. For instance, Citigroup is listed as 

one of the top 10 institutions by deposit volume, and Pew’s research staff identified its affiliate 

bank, Citibank, for data collection. All deposit volume data come from Payment Source, a 

self-reported banking industry database. These banks account for 59 percent of all deposit 

volume. Information regarding the individual bank’s retail checking line deposit volume was 

unavailable. Pew researchers collected data in October 2010.

Due to state variations in many checking account terms and fees, Pew researchers identified 

265 distinct accounts offered by the largest 10 banks.

Information about checking accounts’ fees, terms, and conditions is spread across various 

bank Web pages and documents, many of which are not readily available. When trying 

to find checking account information and account documents—such as an account 

agreement, account agreement addendum, or fee schedule—for each account, the avenues 

of investigation that follow were tried in order until the data were found. Pew researchers 

determined that the following ranking of data locations represented a progression from most 

to least accessible location of information.

1. Visiting the “Account Web Page” (the main page for an account on a bank’s Web site)

2. Following any links to documents “clickable” from the account Web page

3. Browsing the bank’s Web site for other informative pages

4. Using selected keywords to search the bank’s Web site for account documents

5. Calling a bank’s main customer service line to request account documents by fax or mail

6. Calling a local bank branch (closest to Pew) to request account documents by fax or mail

7. Visiting that local bank branch in person to acquire copies of account documents

8. Obtaining information from an online or telephone bank representative (not in writing)

Pew researchers collected and saved all account documents and information over a two-week 

period in October 2010.
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Classification of Data Based o

The varying methods outlined above for obtaining information about the checking accounts 

examined by Pew form the basis for how Pew classified each individual piece of data.

In this report, there are nine data source categories. The categories are:

•	 Data found on account Web page

•	 Data found in fee schedule clickable from account Web page

•	 Data found in account agreement or addendum clickable from account Web page

•	 Data found on a separate page of the bank’s Web site

•	 Data found in fee schedule available only through search of bank’s Web site

•	 Data found in account agreement or addendum available only through search of bank’s 

Web site

•	 Data found in fee schedule available only by visiting bank branch

•	 Data found in account agreement available only by visiting bank branch

•	 Data not available in writing either on a document or on the bank’s Web site

Account Select

Each checking account that Pew examined had the following characteristics identifying it as a 

distinct account:

•	 Bank offering the account

•	 Name of account

•	 State(s) where account agreement was valid

•	 State(s) where account agreement addendum was valid

•	 State(s) where fee schedule was valid

•	 State(s) where additional account document(s) were valid

For example, although there are only three checking accounts listed on Bank of America’s 

checking accounts home page—Advantage with Tiered Interest, eBanking, and MyAccess 

Checking—Bank of America actually has 38 checking accounts in this study because the 

terms and conditions of each type of checking account are not the same in all 50 U.S. states. 

Account documents that are valid in one state or group of states are inaccurate and invalid 

in other states. Another incidence in which checking accounts were differentiated involves a 

situation in which the same account agreement might apply in a particular group of states, 

but those checking accounts might not share the same fee schedule. Examples such as these 

required more complicated sorting to make sure that each checking account identified by 

Pew used only one set of account documents. This system resulted in an accurate count of the 

number of wholly unique checking accounts offered by the 10 largest U.S. banks.

In the simplest instances, some banks had only one version of each account document. For 

other banks, there were variations in their account documents between states or groups of 

states, but these variations occurred uniformly across all account documents. In other words, 

if there were three variations of an account agreement addendum in which each represented 

a third of the U.S. states, there were also three variations of a fee schedule that corresponded 

exactly to the state groups in one of the account agreement addendum’s variations.
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In the most complicated situations, the groups of states in various iterations of one account 

document did not match the groups of states represented in the variations of another account 

document. For example, a hypothetical checking account might have an account agreement 

addendum with two variations—one for CT, MA, NJ, NY, PA (“A”) and one for DE, MD, NH, 

RI, VT (“B”). At the same time, its fee schedule might have two different variations—one for 

CT, MA, NH, RI, VT (“1”) and one for DE, MD, NJ, NY, PA (“2”).

To resolve this, Pew researchers created a table to sort out the wholly unique accounts. 

This table, an example of which appears below, would sort first by the account agreement 

addendum area (“A” or “B”) and then by the fee schedule area (“1” or “2”). This arrangement 

made it easy to see in which states a checking account shared the same version of both 

documents; in other words, researchers were able to determine in which states the variations 

of the account were identical and thus suitable to be recognized by Pew in this study as the 

same account.

In the sorting example shown in Table 6, account document variations produced four distinct 

versions of a generic checking account.

Table 6: Example of How Unique Accounts Were Sor

States Account Agreeme

Addendum Ar

Fee Schedule Area Final Account Gro

C 

Generic Account C

MAA

NJA

Generic Accoun

NJ, NY,

NYA

PAA

N 

Generic Accoun

NH, R

RIB

V 

DEB

Generic Account DE, MD D
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Endnote

1. Federal Deposit Insurance Act, 12 U.S.C.S. § 

1821.

2. Check Clearing for the 21st Century Act (Check 

21), 12 U.S.C.S § 5001 et seq.

3. See, e.g., In re Checking Account Overdraft 

Litig., 734 F. Supp. 2d 1279 (S.D. Fla. 2010).

4. Press Release, Moebs Services, Overdraft Fee 

Revenue Drops to 2008 Levels for Banks and 

Credit Unions, (Sept. 15, 2010), available at 

http://www.moebs.com/Pressreleases/tabid/58/

ctl/Details/mid/380/ItemID/193/Default.aspx.

5. “Most banks (73.0 percent) with automated 

overdraft programs established overdraft 

coverage limits for customers in their written 

policies, consistent with the bank’s lending 

policies. However, large banks were more likely 

than small banks to specify coverage limits on 

automated over draft programs in their written 

policies. About 83 percent of large banks 

established credit limits, compared with 65.2 

percent of small banks. Automated overdraft 

coverage limits stipulated in written policies 

ranged from $85 to $10,000, and the median 

credit limit was $500. As with per-item fees, 

overdraft coverage limits established in policies 

also tended to be lower for small banks.” 

Federal Deposit Insurance Corporation, “Study 

of Bank Overdraft Programs” (November 2008) 

p 16, available at http://www.fdic.gov/bank/

analytical/overdraft/FDIC138_Report_Final_

v508.pdf.

6. Expedited Funds Availability Act, 12 U.S.C.S. 

§ 4002 (regulating when deposited funds 

must be made available), 12 U.S.C.S. § 4004 

(providing for disclosure to customers of a 

bank’s funds availability policies). The FDIC 

and OTS have issued guidance to the financial 

institutions that they oversee regarding 

best practices and admonishing financial 

institutions for manipulating transaction order, 

but these guidelines fall short of binding 

federal regulation. Federal Deposit Insurance 

Corporation Supervisory Guidance for 

Overdraft Protection Programs and Consumer 

Protection FIL-81-2010 (Nov. 24, 2010); Office 

of Thrift Supervision Guidance on Overdraft 

Protection Programs, 70 Fed. Reg. 8428 (Feb. 

18, 2005), available at http://files.ots.treas.

gov/480028.pdf.

7. The “loss, costs, and expenses” clauses are 

found in the account agreements of four banks: 

PNC Bank, “Disputes Involving Your Account,” 

in Account Agreement for Personal Checking, 

Savings, and Money Market Accounts, 10 

(2010); TD Bank, “Indemnity,” in Personal 

Deposit Account Agreement, 20 (June 2010); 

SunTrust, “Adverse Claims,” in Rules and 

Regulations for Deposit Accounts, 20 (June 

2010); HSBC, “Reimbursement of Bank in 

the Event of a Dispute,” in Rules for Deposit 

Accounts, 27 (June 2010).

8. Dodd-Frank Wall Street Reform and Consumer 

Protection Act of 2010, 111 Pub. L. No. 203, § 

1028, 12 U.S.C.S. § 5518.

9. 12 C.F.R. § 226.5a. 

10. Brian K. Bucks, Arthur B. Kennickell, Traci L. 

Mach & Kevin B. Moore, “Changes in U.S. 

Family Finances from 2004 to 2007: Evidence 

from the Survey of Consumer Finances,” 

Federal Reserve Board - Division of Research 

and Statistics, February 2009, available 

at http://www.federalreserve.gov/pubs/

bulletin/2009/pdf/scf09.pdf.

11. Federal Deposit Insurance Act, 12 U.S.C.S. § 

1821. 

12. The Credit Card Accountability, Responsibility, 

and Disclosure (CARD) Act of 2009, 111 Pub. L. 

No. 24, 15 U.S.C.S. § 1665d.

13. 12 C.F.R. §226.5a; Senator Charles E. Schumer, 

http://www.schumer.senate.gov/new_website/

consumers.cfm. 

14. Federal Deposit Insurance Act, 12 U.S.C.S. § 

1811 et seq.; Truth in Savings Act, 12 U.S.C.S. 

§ 4301 et seq.; Electronic Fund Transfer Act, 

15 U.S.C.S. § 1693 et seq.; 12 C.F.R. § 205.1 

et seq.; 12 C.F.R. § 230.1 et seq. Following 

implementation of the Wall Street Reform and 
Hidden Risks: The Case for Safe and Transparent Checking

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Consumer Protection Act on July 21, 2011, 

the Consumer Financial Protection Bureau 

will also be empowered to reduce the risks to 

consumers in checking accounts (Dodd-Frank 

Wall Street Reform and Consumer Protection 

Act of 2010, 111 Pub. L. No. 203, § 1011 et 

seq., 12 U.S.C.S. § 5491 et seq.).

15. Truth in Savings Act, 12 U.S.C.S. §§ 4302-4304; 

Electronic Fund Transfer Act, 15 U.S.C.S. §§ 

1693b-1693d; 12 C.F.R. §§ 205.4, .7-.9, .17, 

230.3-.6, .11.

16. 12 C.F.R. 205.11; U.C.C. § 4-402 (2005).

17. Expedited Funds Availability Act, 12 U.S.C.S. § 

4002.

18. 12 C.F.R. § 229.12; Proposed Rule, Availability 

of Funds and Collection of Checks, 76 Fed. 

Reg. 16862 (March 25, 2011).

19. Federal Trade Commission Act, 15 U.S.C.S. § 

57a(f). The Board of Governors of the Federal 

Reserve issued regulations under the FTCA, 

including restrictions on unfair credit contract 

provision, misrepresentations to cosigners, and 

charging late fees for the untimely payment 

of late fees. 50 Fed. Reg. 16695 (April 29, 

1985). Subsequently, the FTCA rules in 

Federal Reserve Board Regulation AA were 

reserved and replaced in Regulation Z by rules 

implementing the Credit Card Accountability, 

Responsibility, and Disclosure (CARD) Act of 

2009, 111 Pub. L. No. 24, 15 U.S.C.S. § 1601 

et seq.; 12 C.F.R. § 226.1 et seq.; 75 Fed. Reg. 

7658 and 7926 (Feb. 22, 2010). Additionally, 

the Office of Thrift Supervision and National 

Credit Union Administration have limited their 

current regulation of unfair and deceptive 

practices to consumer credit contracts. 12 C.F.R. 

§ 535.1 et seq.; 12 C.F.R. § 706.1 et seq. (these 

were not affected by the CARD Act). Agencies 

empowered to take action against unfair and 

deceptive acts or practices include the Office 

of the Comptroller of the Currency, Board of 

Governors of the Federal Reserve System, and 

the Federal Deposit Insurance Corporation. 

Following implementation of the Wall Street 

Reform and Consumer Protection Act on July 

21, 2011, the Consumer Financial Protection 

Bureau will also be empowered to take action 

against unfair, deceptive, and abusive acts or 

practices. Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010, 111 Pub. L. 

No. 203, § 1031, 12 U.S.C.S. § 5531. 

20. For a list of the roles of the various federal 

banking regulators, please see: U.S. Securities 

and Exchange Commission, “Banking 

Regulators,” available at http://www.sec.gov.

21. Federal Trade Commission Act, 15 USCS § 

57a(f).

22. Dodd-Frank Wall Street Reform and Consumer 

Protection Act of 2010, 111 Pub. L. No. 203, § 

1031, 12 U.S.C.S. § 5531.

23. Id. § 1032, 12 U.S.C.S. § 5532. The Act 

requires that the disclosure information provide 

consumers with the ability to understand 

the costs, benefits, and risks associated with 

the product or service. The Act specifically 

allows the CFPB to include in its rulemaking 

the use of a model form that includes plain 

language, clear format and design, and 

succinct information. Any financial institution 

that uses the model form will be deemed to 

be in compliance with the CFPB’s disclosure 

requirements.

24. Dodd-Frank Wall Street Reform and Consumer 

Protection Act of 2010, 111 Pub. L. No. 203, § 

1031(d), 12 U.S.C.S. § 5531(d).

25. The proliferation of so many checking accounts 

among only 10 banks is largely due to stateby-state variations for each type of checking 

account a bank offered. For example, although 

Bank of America only offered three types of 

checking accounts online in October 2010—

Advantage with Tiered Interest, eBanking, and 

MyAccess Checking—they actually had 38 

unique checking accounts in this study because 

the terms and conditions for each of those 

three types of checking accounts are not the 

same in all 50 states. 

26. See, e.g., In re Checking Account Overdraft 

Litig., 734 F. Supp. 2d 1279 (S.D. Fla. 2010).

27. Payments Source Database, “Total Deposits” 

(October 2010).
Hidden Risks: The Case for Safe and Transparent Checking

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28. Truth in Savings Act, 12 U.S.C.S. § 4303(a), (d).

29. Id. § 4308 (providing authority to issue 

regulations and model forms); § 4309 

(providing authority to enforce compliance 

with TISA requirements). See also, id. § 4303(e) 

(noting that disclosures must be clear, in plain 

language, and readily understandable).

30. Electronic Fund Transfer Act, 15 U.S.C.S. § 

1693c(a).

31. Id. §§ 1693o, 1693b(b).

32. 12 C.F.R. § 230.4(b)(3)(i)(A), (4).

33. Id. § 230.3(a).

34. 12 C.F.R. § 230 Supp. I 230.3(a)(1)(i), (iv).

35. Id. § 230.3(a)(1)(ii)-(iii).

36. 12 C.F.R. § 205.7(b)(1), (4)-(5).

37. Id. § 205.7(a) (regulation requires disclosure 

“at the time a consumer contracts for an 

electronic fund transfer service or before the 

first electronic fund transfer is made...”).

38. Id. § 205.17(b)(1), (c).

39. Protecting Consumers from Abusive Overdraft 

Fees: The Fairness and Accountability in 

Receiving Overdraft Coverage Act Hearing, 

Before the S. Comm. on Banking, Housing, 

and Urban Affairs, 111th Congress (Nov. 17, 

2009) (testimony of John P. Carey, Citigroup 

North America Consumer Banking), available 

at http://www.banking.senate.gov/public/

index.cfm?FuseAction=Files.View&FileStore_

id=5fc3d6c8-2f17-4f94-a30f-37d28a69e6d0; 

Andrew Martin, “Bank of America to End 

Debit Overdraft Fees,” N.Y. Times, March 

9, 2010, available at http://www.nytimes.

com/2010/03/10/your-money/credit-and-debitcards/10overdraft.html.

40. Bank of America, Deposit Agreement and 

Disclosures—Effective June 19, 2010—Arizona, 

Arkansas, Connecticut, Delaware, Florida, 

Georgia, Illinois, Indiana, Iowa, Kansas, Maine, 

Maryland, Massachusetts, Michigan, Missouri, 

Nevada, New Hampshire, New Jersey, New 

Mexico, New York, North Carolina, Oklahoma, 

Oregon, Pennsylvania, Rhode Island, South 

Carolina, Tennessee, Texas, Virginia and 

Washington D.C., available at https://www3.

bankofamerica.com/deposits/odao/popup/

disclosure_popup.cfm?template=dad&Requ

estTimeout=300; Citibank, Client Manual—

Consumer Accounts—Including Our Privacy 

Notice—U.S. Markets—Effective July 1, 2010, 

available at https://online.citibank.com/JRS/

popups/ao/Client_Manual_20100701.pdf.

41. 12 C.F.R. § 204.2(d)(2). For overdraft transfers 

that link to a line of credit or credit card, the 

accountholder will pay a minimal amount of 

interest in addition to the overdraft transfer fee.

42. 12 C.F.R. § 205.17(a), (b), (d)(5).

43. 12 C.F.R. § 205 App. A-9. The current model 

disclosure issued by the Federal Reserve only 

recommends the following statement: “We 

also offer overdraft protection plans, such 

as a link to a savings account, which may be 

less expensive than our standard overdraft 

practices. To learn more, please ask us about 

these plans.”

44. Federal Deposit Insurance Corporation, “Study 

of Bank Overdraft Programs” (November 2008), 

available at http://www.fdic.gov/bank/analytical/

overdraft/FDIC138_Report_Final_v508.pdf.

45. Banks typically assess an extended overdraft 

fee (explained in a subsequent paragraph) after 

a balance is negative for seven days.We use 

this seven-day period in our calculation for this 

reason.

46. 12 C.F.R. § 204.2(d)(2).

47. “Excessive overdraft fees are analogous to 

loan flipping,” in Comments of Center for 

Responsible Lending, Consumer Federation 

of America, National Consumer Law Center 

(on behalf of its low-income clients) and 

Consumer Action, Consumers Union, 

National Association of Consumer Advocates, 

U.S. PIRG, on FDIC’s Proposed Overdraft 

Payment Supervisory Guidance FIL 47 2010, 

(September 27, 2010), 10.
Hidden Risks: The Case for Safe and Transparent Checking

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48. Dennis Campbell, Asis Martinez Jerez & 

Peter Tufano, Bouncing Out of the Banking 

System: An Empirical Analysis of Involuntary 

Bank Account Closures (Harvard Business 

School, June 6, 2008). See also Michael 

S. Barr, Financial Services, Savings and 

Borrowing Among Low- and ModerateIncome Households: Evidence from the Detroit 

Area Household Financial Services Survey 

(University of Michigan Law School, March 

30, 2008) (finding that among those surveyed 

who formerly had a bank account, 70% 

chose to close the account themselves, citing 

moving, worrying about bouncing checks, and 

excessive fees as their reasons for closing the 

account. The remaining formerly banked, 30%, 

reported that their bank closed their account; 

the primary reason was bounced checks and 

overdrafts).

49. Federal Deposit Insurance Corporation 

Supervisory Guidance for Overdraft Protection 

Programs and Consumer Protection, FIL-81-

2010 (Nov. 24, 2010).

50. 12 C.F.R. § 227.1 et seq.; 12 C.F.R. § 535.1 et 

seq.; 12 C.F.R. § 706.1 et seq.

51. Id. 

52. Federal Deposit Insurance Corporation 

Supervisory Guidance for Overdraft Protection 

Programs and Consumer Protection, FIL-81-

2010 (Nov. 24, 2010).

53. Office of Thrift Supervision Guidance on 

Overdraft Protection Programs, 70 Fed. Reg. 

8428 (Feb. 18, 2005), available at http://files.

ots.treas.gov/480028.pdf.

54. Center for Responsible Lending, “Overdraft 

Loans: Survey Finds Growing Problem for 

Consumers” (April 24, 2006), available at http://

www.responsiblelending.org/overdraft-loans/

research-analysis/ip013-Overdraft_Survey-0406.

pdf; Federal Deposit Insurance Corporation, 

“Study of Bank Overdraft Programs” 

(November 2008), available at http://www.

fdic.gov/bank/analytical/overdraft/FDIC138_

Report_Final_v508.pdf.

55. Id.

56. Pew Health Group, “Unbanked by Choice: 

A look at how low-income Los Angeles 

households manage the money they earn” (July 

2010), available at http://www.lafla.org/pdf/

Unbanked_PEW2010.pdf.

57. The Overdraft Protection Act of 2009: Hearing 

Before H. Comm. on Financial Services, 111th 

Cong. 7-9 (2009) (statement of Nessa Feddis, VP 

and Senior Counsel, American Bankers Ass’n).

58. The Credit Card Accountability, Responsibility, 

and Disclosure (CARD) Act of 2009, 111 Pub. L. 

No. 24, 15 U.S.C.S. § 1665d(a).

59. Id.

60. 12 C.F.R. § 226.52(b).

61. Due to rapid developments related to bank reordering practices, Pew researchers continued 

to monitor changes for these practices until 

publication of this report in late April 2011.

62. Chase, Account Rules and Regulations—Your 

Guide To: Checking, Savings, Certificates of 

Deposit, Overdraft Protection, Privacy Notice 

(Jan. 1, 2011). 

63. Dickler, Jessica, “Good news on overdrafts! 

Citi will pay small checks first,” CNN Money, 

Apr. 4, 2011, available at http://money.cnn.

com/2011/04/04/pf/citi_check_cashing/index.

htm.

64. A few state laws address the issue, mostly with 

a “good faith” requirement.

65. Federal Deposit Insurance Corporation 

Supervisory Guidance for Overdraft Protection 

Programs and Consumer Protection, FIL-81-

2010 (Nov. 24, 2010).

66. Gutierrez v. Wells Fargo Bank, 730 F. Supp. 

2d 1080, 1114 (N.D. Cal. 2010) (Wells Fargo’s 

expert witness is quoted as follows: “Even 

if they were to read, word for word...some 

of those lengthy documents, such as the 

account agreement...it would be impossible 

for [customers] to predict the exact balance [of 

their checking accounts] at any particular point 

in time.”).
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67. Prior to Gutierrez, 730 F. Supp. 2d 1080, 

numerous lawsuits challenged high-to-low 

posting order policies that increased the 

number of overdraft and NSF fees customers 

incurred. These lawsuits were brought under 

state contract and consumer protection 

laws. See, e.g., Hill v. St. Paul Fed. Bank for 

Savings, 329 Ill. App. 3d 705 (Ill. App. Ct. 

2002) (consumer fraud, UCC, and deceptive 

business practices claims failed); Hassler v. 

Sovereign Bank, 644 F. Supp. 2d 509 (D. N.J. 

2009) (consumer fraud, unjust enrichment, 

and contract claims failed). Regardless of the 

legal theory presented, all of these plaintiffs 

failed in their lawsuit. Since the $203 million 

judgment was handed down in Gutierrez, 

several banks have settled similar class action 

suits for millions of dollars. See, e.g., Trombley 

v. National City Bank, 2011 U.S. Dist. LEXIS 

2509 (D.D.C. 2011). In addition, a multidistrict 

litigation case is pending in the Southern 

District of Florida. This case is a consolidation 

of many class action suits from around the 

country challenging various banks’ high-to-low 

posting order policies. In total, 31 banks are or 

were defendants, including 27 of the 44 largest 

financial institutions by deposit volume and 

all ten Pew analyzed. In re Checking Account 

Overdraft Litig., 2010 U.S. Dist. LEXIS 85494 

(J.P.M.L. 2010).

68. E.g., In re Checking Account Overdraft Litig., 

694 F. Supp. 2d 1302 (S.D. Fla 2010).

69. The Overdraft Protection Act of 2009: Hearing 

Before H. Comm. on Financial Services, 111th 

Cong. 7-9 (2009) (statement of Nessa Feddis, 

VP and Senior Counsel, American Bankers 

Ass’n). See also, Gutierrez v. Wells Fargo Bank, 

730 F. Supp. 2d 1080, 1107 (N.D. Cal. 2010) 

(“Some banks argued that most customers 

prefer high-to-low posting because it results in 

their largest bills being paid first.”).

70. In his opinion, the judge in Gutierrez found 

that “the only motives behind the challenged 

practices were gouging and profiteering” and 

high to low processing is “a trap—a trap that 

would escalate a single overdraft into as many 

as ten through the gimmick of processing in 

descending order. It then exploited that trap 

with a vengeance, racking up hundreds of 

millions off the backs of the working poor, 

students, and others without the luxury of 

ample account balances.” Gutierrez v. Wells 

Fargo Bank, 730 F. Supp. 2d 1080, 1112, 19 

(N.D. Cal. 2010).

71. See, e.g., Larin v. Bank of America, 725 F. Supp. 

2d 1212 (S.D. Cal. 2010); Montgomery v. Bank of 

America, 515 F. Supp. 2d 1106 (C.D. Cal. 2007). 

72. Gutierrez v. Wells Fargo Bank, 730 F. Supp. 

2d 1080 (N.D. Cal. 2010). A federal court 

in Missouri also rejected the preemption 

argument in September 2010. Joseph v. 

Commerce Bank N.A., 2010 U.S. Dist. LEXIS 

97664 (W.D. Mo. 2010).

73. Gutierrez, 730 F. Supp. 2d 1080, 1124.

74. In re Checking Account Overdraft Litig., 734 F. 

Supp. 2d 1279 (S.D. Fla. 2010).

75. The Credit Card Accountability, Responsibility, 

and Disclosure (CARD) Act of 2009, 111 Pub. 

L. No. 24, 15 U.S.C.S. § 1665d(e); 12 C.F.R. 

226.52(b).

76. Dodd-Frank Wall Street Reform and Consumer 

Protection Act of 2010, 111 Pub. L. No. 203, § 

1032(d), 12 U.S.C.S. § 5532(d).

77. David S. Schwartz, “Mandatory Arbitration 

and Fairness,” 84 Notre Dame Law Review 3 

(June 1, 2009); Amanda Perwin, “Mandatory 

Binding Arbitration: Civil Injustice by Corporate 

America” (August 2005), Center for Justice 

& Democracy: New York, available at http://

www.centerjd.org/archives/issues-facts/

ArbitrationWhitePaper.pdf.

78. Federal Arbitration Act, 9 USC § 2; Tillman v. 

Commer. Credit Loans, Inc., 655 S.E.2d 362, 

370 (N.C. 2008). See Johnson v. Keybank Nat’l 

Ass’n (In re Checking Account Overdraft Litig.), 

718F. Supp. 2d 1352, 1358 (S.D. Fla. 2010).

79. In re Checking Account Overdraft Litig., 694 

F. Supp. 2d 1302 (S.D. Fla 2010); Johnson v. 

Keybank Nat’l Ass’n (In re Checking Account 

Overdraft Litig.), 718 F. Supp. 2d 1352, 1358 

(S.D. Fla 2010).
Hidden Risks: The Case for Safe and Transparent Checking

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80. Big Lots Stores v. Luv N’ Care, 302 Fed. Appx. 

423, 426 (6th Cir. 2008); Miles v. The N.Y. State 

Teamsters Conf. Pension & Ret. Fund Employee 

Pension Benefit Plan, 698 F.2d 593, 601-02 (2d 

Cir. 1983); Southwest Marine, Inc. v. Campbell 

Indus., 796 F.2d 291, 292-93 (9th Cir. 1986) 

(Noonan, J., concurring).

81. Dodd-Frank Wall Street Reform and Consumer 

Protection Act of 2010, 111 Pub. L. No. 203, § 

1028(a), 12 U.S.C.S. § 5518(a).

82. Id. § 1028(b), 12 USCS § 5518(b).

83. U.C.C. § 4-403 (2005) “(b) A stop-payment 

order is effective for six months, but it lapses 

after 14 calendar days if the original order was 

oral and was not confirmed in a record within 

that period. A stop-payment order may be 

renewed for additional six-month periods by a 

record given to the bank within a period during 

which the stop-payment order is effective.” 

Available at http://www.law.cornell.edu/ucc/4/

article4.htm#s4-303.
Hidden Risks: The Case for Safe and Transparent Checking

HEAL TH GROU P

HEAL TH GROU P

901 E Street NW

Washington, DC 20004

T: 202.552.2000

The Pew Charitable Trusts is driven by the power 

of knowledge to solve today’s most challenging 

problems. Pew applies a rigorous, analytical 

approach to improve public policy, inform the 

public and stimulate civic life.

The analysis and recommendations included in this report are solely those of The Pew Charitable Trusts 

and do not necessarily reflect the views of outside reviewers.

Acknowledgem

The project team would like to thank the following individuals for their careful and critical reading of this report:

Adam Levit

Associate Professor of Law

Georgetown University Law Center

Chi Chi Wu

Attorney 

National Consumer Law Center

We would like to thank our Pew colleagues—Julia Moore, Ivan Amato, Lisa Gonzales, Glen Howard, 

Nicolle Grayson, Eleanor Blume, Kimberly Ochylski, Kodi Seaton and Alex Parlini for their assistance in 

readying this report for publication. We thank Scott Winship, research manager of the Economic Mobility 

Project, for his review of data and charts, Penelope Malish for her report design, Jay Groff for his chart 

design and Bulletproof for proofreading.

the Pew Safe checking in the El

Project 

Susan Weinstoc

Project Director

Ardie Hollifiel

Project Manager

Thaddeus Kin

Alexander Marto

Eric Nico

The Safe Checking in the Electronic Age Project aims to restore transparency, fairness, responsibility and 

free market principles to one of the most common consumer financial products—the checking account.

For more information, visit www.pewtrusts.org/safechecking

The Pew Healt

Shelley A. Hear

Managing Director

Eleni Constantin

Director, Financial Security Portfolio