The transition of overdrafts from a float-based, paper check transaction to a plastic card swipe or ACH transaction mirrors the heavy influence of technology on financial culture.

Overdraft revenue hit a zenith of $37.6 billion in the third quarter of 2008. Since the peak, overdrafts dropped to a low of $30.1 billion in the first quarter of 2011. The first quarter of 2017 shows overdraft revenue at $33.6 billion, only 10.6 percent below the all-time high.

The federal government, some states and consumer advocates have attempted to kill overdrafts in the past. But now, with the Financial Choice Act likely to pass Congress, compliance on overdrafts appears headed for less restriction.

The consumer has been hoarding cash in checking accounts since the 2008 Great Recession. With legislative uncertainty, lack of wage growth and total unemployment (U6) still at 8.4 percent, the consumer is not engaging in the market. As a result, overdraft transactions for a single consumer fell from 4.4 a year in 2007 to 3.1 in the past four years.

 

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