For banks and credit unions, a well-managed overdraft program can serve an important purpose. It provides accountholders with access to short-term liquidity when they need it while contributing to an institution’s non-interest income. But how do financial institutions know whether their overdraft programs are performing effectively? The answer goes well beyond revenue.

Program structure, accountholder participation, opt-in rates, overdraft limits, refunds, charge-offs, recoveries, and even seasonal trends can influence overall performance. Understanding how these factors work together is essential to maintaining a program that balances financial performance with the needs of accountholders. While most financial institutions have access to their own performance data, understanding how those results compare to similar institutions can be much more challenging.

That’s where peer benchmarking becomes valuable. Using aggregated, de-identified data collected through Pinnacle’s SmartTech platform, we analyzed overdraft performance across more than 100 banks and credit unions. The findings reveal meaningful differences in how programs perform and highlight several important considerations for financial institutions evaluating their own results.

This article launches Pinnacle’s Inside the Numbers series, where we’ll share insights from SmartTech peer data, explore the factors influencing overdraft performance, and discuss what those findings mean for banks and credit unions. Our goal is to move beyond the numbers to provide practical information that helps financial institutions better understand, evaluate, and responsibly manage their overdraft programs.

Why Responsible Overdraft Management Matters

Overdraft programs have faced significant scrutiny over the years, and conversations about fees and consumer protection remain important. However, those discussions can sometimes overshadow the role a responsibly structured overdraft program may play in helping consumers manage an unexpected expense or temporary cash shortfall.

For some accountholders, overdraft coverage can provide a convenient source of short-term liquidity without requiring a separate loan application. Depending on the circumstances and costs involved, it may also offer an alternative to certain high-cost borrowing options. The distinction is how the program is designed, communicated, and managed.

Transparency, reasonable fees, appropriate limits, consumer choice, and ongoing performance monitoring are all important considerations in ensuring an overdraft program serves both the institution and its accountholders. With that perspective in mind, here are five key takeaways from our SmartTech peer data.

1. Overdraft Performance Varies More Than You Might Expect

One of the most notable findings was the difference in gross overdraft revenue generated across the institutions analyzed. The median financial institution generated approximately $6.47 in gross overdraft revenue per active account per month. At the 90th percentile, that figure increased to $12.66.

That’s nearly twice the median. While higher revenue does not automatically indicate a healthier or more effective program, the difference raises an important question: What factors are contributing to such a wide range of results? Accountholder behavior, participation, program structure, overdraft limits, and operational practices can all influence performance.

The takeaway: Revenue is an important metric, but it should never be evaluated in isolation. Understanding why performance differs can help financial institutions identify opportunities to improve program management, operational efficiency, and the overall accountholder experience.

2. Institution Type and Size Don’t Tell the Whole Story

Banks and credit unions often approach overdraft management differently, and our peer data reflects that distinction. Within the institutions analyzed, credit unions generally reported higher gross overdraft revenue per active account than banks. However, that difference alone doesn’t tell us which programs are performing more effectively.

Differences in membership characteristics, accountholder behavior, participation, and program structure can all influence results. Comparing institutions without accounting for these factors can lead to misleading conclusions.Institution size also proved to be less of a differentiator than some might expect.

Among banks in our analysis, smaller and mid-sized institutions demonstrated results comparable to those of much larger banks. This reinforces an important point: A larger institution does not necessarily have a more effective overdraft program.

The takeaway: Meaningful benchmarking requires looking beyond institution type and asset size. Financial institutions should evaluate their performance in the context of comparable peers while considering the unique characteristics of their accountholders and programs.

3. Seasonality Can Significantly Influence Overdraft Activity

Overdraft performance isn’t necessarily consistent from month to month. Our SmartTech data identified noticeable seasonal patterns, with certain months consistently experiencing stronger or weaker activity relative to an institution’s average monthly performance. December and October were among the stronger months, while February and March were among the weakest.

These patterns may reflect changes in household spending and available liquidity throughout the year. For example, holiday shopping and back-to-school expenses coincide with periods of increased overdraft activity, while tax-refund season may provide some consumers with additional financial flexibility. Although these observations do not establish a direct cause-and-effect relationship, they demonstrate why understanding seasonal trends is important. An institution experiencing a decline in overdraft activity during a particular month may not necessarily have an underlying program issue. The change could reflect broader seasonal patterns.

The takeaway: Evaluating overdraft performance over time, rather than relying on individual months, can provide a more accurate understanding of program trends and help institutions distinguish normal fluctuations from areas that warrant further review. When your overdraft activity changes from one month to the next, do you know whether it’s a normal seasonal fluctuation or an indication that something within your program needs attention?

4. Opt-In Rates Matter, but They Aren’t the Only Measure of Success

Opt-in is an important component of overdraft management, particularly for institutions evaluating participation in overdraft services for ATM and one-time debit card transactions. Across institutions in our analysis with available opt-in data, the median reported opt-in rate was 28.4%.

However, our findings also showed that higher opt-in rates did not necessarily translate into proportionally higher overdraft revenue. That distinction matters. An institution’s opt-in rate represents only one aspect of how accountholders engage with its overdraft program. Actual utilization, transaction activity, program limits, and individual financial behaviors can all influence outcomes. Equally important is ensuring accountholders understand the services available to them and can make informed decisions about their participation.

The takeaway: Opt-in rates should be considered alongside utilization, participation, accountholder behavior, and other performance indicators. A comprehensive evaluation provides a clearer picture than any single metric.

5. Revenue Quality Is Just as Important as Revenue Generation

Perhaps one of the most important findings from our analysis is that gross overdraft revenue tells only part of the story. Refunds, charge-offs, and recoveries can materially influence the amount of revenue an institution ultimately retains. Two institutions generating similar gross overdraft revenue may experience very different financial outcomes depending on how their programs are structured and managed.

For example, an institution with higher gross revenue may also experience elevated charge-offs or refund activity, reducing its overall retained revenue. Conversely, an institution generating more modest revenue may demonstrate stronger retention and more consistent program performance. This is why understanding revenue quality is essential. A comprehensive overdraft evaluation should consider not only what a program generates but also the costs, losses, operational practices, and accountholder outcomes associated with that performance.

The takeaway: A successful overdraft program should not be defined solely by revenue. Financial institutions benefit from evaluating multiple performance indicators to better understand program sustainability, operational effectiveness, and opportunities for improvement.

Are you evaluating your overdraft program based on what it generates, or are you also measuring what it retains and how it serves your accountholders?

Looking Beyond the Numbers

Understanding overdraft performance requires more than reviewing a monthly revenue report. It requires examining the factors that influence results, recognizing trends, and understanding how a program compares to relevant peers.

Through Pinnacle’s Inside the Numbers series, we’ll continue exploring what SmartTech peer data reveals about overdraft programs and how financial institutions can use those insights to make more informed decisions.

Our goal is to encourage a more informed conversation about overdraft management, one that recognizes both the importance of responsible practices and the value these programs can provide to accountholders when they need financial flexibility.

For 25 years, Pinnacle has worked with banks and credit unions to help them navigate the complexities of overdraft management. SmartTech allows us to combine that experience with meaningful peer intelligence to help institutions better understand their programs.

How Does Your Overdraft Program Compare?

Understanding your own numbers is important. Understanding what those numbers mean in the context of comparable institutions can provide an entirely different perspective. Learn more about how Pinnacle and SmartTech help financial institutions evaluate program performance, identify opportunities for improvement, and manage overdraft programs responsibly.

Follow Pinnacle on LinkedIn for future articles in our Inside the Numbers series.

About the SmartTech Peer Data

This analysis is based on aggregated, de-identified performance data from financial institutions using Pinnacle’s SmartTech platform.

The primary analysis covers August 2025 through July 2026 and includes 119 established financial institutions with at least nine months of qualifying overdraft revenue and active-account data.

Certain comparisons reflect subsets of the participating institutions based on data availability. Findings represent the SmartTech peer population and should not be interpreted as industry-wide benchmarks or measures of consumer outcomes.