(NNPA)—Consumers who maintain low and no cushions in their checking accounts may have thought that the overdraft “banking service” was a big help against bouncing checks. But as the use of debit cards have replaced most cash purchases, this “service” has become a drain of available cash for consumers and a major source of revenue for banks.

A new research report by the Consumer Financial Protection Bureau found that the majority of debit card overdraft fees are incurred on transactions of $24 or less. Further, as the majority of overdrafts are repaid within three days when the bank repays itself from the consumer’s next deposit, the median overdraft fee of $34 carries the equivalent of 17,000 percent annual percentage rate.

Earlier research by the Center for Responsible Lending similarly found that consumers using debit cards paid $1.75 for every $1 overdrawn.

“With the advent of debit cards, consumers started using them rather than cash for more and more small or impulse purchases. And, as banks and credit unions covered more and more of the transactions, they have assessed higher fees for doing so,” said CFPB Director Richard Cordray. “Today, more than half of consumer checking account income is from overdraft fees.”

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