Overdraft charges are an important source of revenue for banks — $31.3 billion in 2020. They are also a continuing source of confusion and consternation for bank customers (especially when — surprise — a $5 latte ends up costing $150).
By way of brief history, there once was a time when banks would pay an occasional overdraft for a well-established customer and an actual human being would call the customer and politely ask that a deposit be made to cover the overdraft. A modest one-time fee might or might not be charged for this courtesy. But then banks found they could automate the payment of overdrafts, market “overdraft protection” as a customer service and make a tidy profit charging fees.