Who Pays the Price? Overdraft Fee Ceilings and the Unbanked


Many low-income households in the United States are unbanked. High fees are often cited as a reason they remain unbanked, leading some to believe that limiting bank fees would improve financial inclusion. We use the federal preemption of state limits on overdraft fees to study the impact of fee ceilings on low-income households. After preemption, national banks raise overdraft fees relative to state-chartered banks in affected states. However, banks in affected states also provide more overdraft credit and bounce a smaller share of checks following preemption. The share of low-income households that are unbanked decreases, consistent with price ceilings causing the rationing of overdraft services and corresponding declines in demand and supply of bank accounts.


Dlugosz, Jennifer L., Brian T. Melzer, and Donald P. Morgan, Who Pays the Price? Overdraft Fee Ceilings and the Unbanked, Federal Reserve Bank of New York Staff Report No. 973, June 2021.


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