When we overspend our account with a check or debit card purchase and the bank covers it, we have to make good, right? Overdraft penalties, which average from $30 to $34 nationwide, theoretically act as a deterrent. That pays the bank's costs for papering over our errors.
In fact, there is little correlation between a banks' cost to administer bounced checks or overzealous swipes. Overdraft fees, like most bank fees, are set by what the competition is charging. Nor are overdraft penalties related to going interest rates: charging $34 for covering the average overdraft of $36 for a week (when banks usually hit overdrawn customers with a second, "extended overdrawn balance" fee) amounts to a 5,000 percent annual interest rate.