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Checking Balances Swell, Overdrafts Fall

Poll QuestionThe number of overdraft charges on checking accounts is on the decline, but there might be a curious reason why.

It has everything to do with low interest rates, according to one analysis.

A survey of 2,890 financial institutions by Moebs $ervices, a suburban Chicago-based financial research company, found that overdrafts per checking account numbered 7.1 in 2013, according to Time.com.

That’s a 14-year low, according to the magazine’s website, down from 7.4 in 2012 and a whopping 9.8 in 2009.

But even in decline, this figure is way too high for one big reason: Each of those overdrafts costs on average $32.20, according to Bankrate.com’s 2013 Checking Survey.

That adds up to $228.62 per checking account annually. Bet you didn’t earn that much in interest last year on your account.

Overall, financial institutions collected a staggering $32 billion in overdraft fees for the second consecutive year. Banks and credit unions are keeping that revenue stream flowing by raising the cost of an overdraft even as accounts hit zero less frequently.

Moebs $ervices CEO and economist Mike Moebs, in an interview with Time.com, credited the decrease in the number of overdrafts to the increase in cash people now keep in their checking accounts.

In the past few years, he says he’s seen a movement toward stockpiling cash in short-term accounts, specifically checking accounts.

Sure, having all of your money in your checking account eliminates the possibility of incurring overdrafts. But it’s a pretty sad statement about the attractiveness of other types of bank accounts.

We know from previous polls that savers continue to shy away from low-paying certificates of deposit. We certainly can’t blame them.

Two of the six certificate of deposit terms we track – 3- and 6-month CDs – currently are offering record-low average rates, according to our weekly survey of banks and thrifts.

The other four terms are all within three one-hundredths of a percentage point of their record lows. So we understand savers’ ambivalence.

But we want to hear from you.

Let’s assume you’re keeping more money in your checking account.

Tell us why.

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I’m keeping more money in my checking account because ...
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