If you’re like a lot of people, you have a debit card. So you’ve already received a letter from your bank about what a great service debit card overdraft coverage is, and how important it is for you to keep it. This letter is a result of new credit card rules that require banks to ask you if you would rather opt out of paying for an overdraft and just have your purchase declined. The change in regulations was encouraged by consumer complaints about out of control bank overdraft fees . If you have not already decided, bear in mind the only reason you got that letter is because banks make significant money charging penalties for that service.
Resource for this article: Why opting out of debit card overdraft coverage is a good idea by Personal Money Store
Debit card overdraft coverage – money for nothing
When debit card use began taking off, Jeff Gelles at the Philadelphia Inquirer said that banks smelled big money and instantly started scheming about how to blur the distinction between debit and credit cards. Your checking account supplies the funds for your debit card. When you use your debt card and there is no money left, overdraft protection charges a debit card overdraft fee to make the purchase. So you could end up paying $ 40 for a cup of coffee. If you are short of cash, it makes more sense to get a payday loan than to let your bank rip you off with debit card overdraft fees.
Big bank pulls overdraft fees—could others follow
Gelles gives the advice that you should opt out of your bank’s overdraft protection “service”. Even Bank of The United States thinks that’s good advice. Bank of America announced in March that it will no longer offer debit card overdraft coverage. The New York Times reports that the decision could cost the bank tens of millions a year in revenue from debit card overdraft fees and put pressure on other banks to do the exact same.
Banks rob customers blind with overdraft fees
The penalties can add up fast with bank overdraft fees because you don’t realize it happens at the time. When you get charged once, you could keep getting charged until you understand what’s going on, Gelles said, as the Starbucks barista doesn’t say “You know this is an overdraft, do not you?. There are no legal limits to how many times you are able to get penalized. But Wachovia gives you a “break” by stopping at four overdrafts a day, or $ 140. Citizens Bank, not quite as concerned about customer well being, will gladly pilfer $ 37 each for up to seven overdrafts a day: $ 259.
Get organized to avoid bank overdraft fees
That too many individuals are lousy at balancing their checkbook is a problem highlighted by new credit card rules about bank overdraft fees. In a press release, tips for avoiding overdraft fees or the unpleasant experience of having a purchase declined are offered by Michael S. Kappas, President and CEO of Apprisen:
1. Remember your true account balance is with your check register, not on your ATM slip.
2.Stay on top of all deposits, receipts and withdrawals as part of your check register.
3.Know your checking account balance before you make a debit card purchase or ATM withdrawal.
4. Whether you write checks or not, balance your account once a month.
5. Put “ghost” funds with your checking account. Deposit a few hundred dollars and do not record it inside your register. Don’t forget to account for the ghost funds when you balance your account.
6. Talk to your bank representative about your choices for avoiding all potential overdraft situations.
philly.com
nytimes.com
prweb.com
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