October 20, 2022
Source: Consumer Financial Protection Bureau (CFPB)
This issue brief examines how overdraft fees affect economically insecure older adults. An overdraft occurs when a consumer has insufficient funds in their account to cover a transaction, but the financial institution nevertheless pays it. Most financial institutions today charge a fee, which can be as high as $36, for overdraft transactions.
Although older adults as a whole incur overdraft fees less frequently than other age groups, economically insecure older adults are particularly impacted by overdraft fees because they are often unable to adjust their carefully managed budgets to pay unexpected fees. Older adults of color, older women, LGBTQ+ older adults, and retirees are more likely to be economically insecure and may face greater challenges with overdraft fees. Older adults may be more susceptible to overdraft fees for a variety of reasons, including reliance on Social Security benefits, caregiving responsibilities, the loss of a partner, limited access to financial technology, or cognitive impairment.