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Banks’ tricky debit card rules can empty your wallet
a NY Daily News Editorial
Friday, November 27th 2009, 4:00 AM
Attention, Black Friday shoppers: You may be on the verge of getting robbed.
Before you swipe that debit card, be warned that banks have elaborate schemes to rip you off through overdraft charges.
By enticing or tricking consumers into overdrawing their accounts and then levying exorbitant fees, banks raked in $24 billion in 2008. This year, they’re on track to top $38 billion, with most of the money drawn from the accounts of low-income customers.
First, a bank voluntarily provides overdraft “protection” that permits customers to debit more than what’s in their accounts.
Second, the bank allows transactions to go through without warning customers that they are overdrawing.
Third, the bank charges as much as $35 for the overdraft – even for the purchase of, say, a $4 cup of coffee.
Fourth, if a customer makes several charges, the bank deducts the biggest one first, so that as many as possible of the smaller ones trigger individual $35 fees.
Fifth, banks send overdraft notices by mail while fees keep piling up at a rate of $8 a day, or $35 every five days.
Congress and the Federal Deposit Insurance Corp. are working on measures to control this bank fraud. Meanwhile, you’re on your own.
Search out those banks that behave better than others. Citigroup, for example, does not process debit overdrafts without express approval.
And track how much is in your account – very carefully. Some banks take their time subtracting pending withdrawals from customers’ balances, so accounts look bigger than they are. And some print out ATM receipts that show deceptive “available balances.” The amount includes not just a customer’s cash, but also the maximum overdraft the customer is authorized to make.
Caveat emptor.
minimally edited for halachic reasons
Just to make this wildly popular thread more popular I have decided to post here
There are other problems with using debit cards, even though they seem at first glance, a good idea.
While federal law limits your liability to $50 if the card is lost or misused by others, but the limit for debit cards is $500, if you notice and report the theft within 48 hours. This means, you are on the hook for at least the first $500 that is stolen from you, with no recourse. If you do not notice and report the theft within 60 days, you can be liable for the total amount in your checking account PLUS you maximum overdraft line-of-credit.
Many banks claim to limit your liability with a debit card to $50, but there have been complaints that many banks have not honored this limit.
Of course, the way you will notice that you have been robbed is that your checks will start to bounce, causing you great embarrasment and piling on the huge fees that ICOT speaks of above.
You can ask your bank for an ATM card that is not a debit card (doesn’t have the Visa or Mastercard logo on it) that will only work in ATM Machines.
but yet you didn’t say anything about the article
There are other problems with using debit cards, even though they seem at first glance, a good idea.
While federal law limits your liability to $50 if the card is lost or misused by others, but the limit for debit cards is $500, if you notice and report the theft within 48 hours. This means, you are on the hook for at least the first $500 that is stolen from you, with no recourse. If you do not notice and report the theft within 60 days, you can be liable for the total amount in your checking account PLUS you maximum overdraft line-of-credit.
Many banks claim to limit your liability with a debit card to $50, but there have been complaints that many banks have not honored this limit.
Of course, the way you will notice that you have been robbed is that your checks will start to bounce, causing you great embarrasment and piling on the huge fees that ICOT speaks of above.
You can ask your bank for an ATM card that is not a debit card (doesn’t have the Visa or Mastercard logo on it) that will only work in ATM Machines.
By the way, this did happen to my 17-year old stepson earlier this year. He has a “student” checking account linked to my wife’s checking account.
He overdebited his account by $0.16 (his fault, entirely) and that small act ended up racking up close to $100 in bounced checks and fees, much to our and his horror. That seems vastly unfair on every level, even though it was his fault.
When we revived him, we coached him to go into the bank and explain the situation to the sympathetic officer who had helped him open the account, and they forgave the fees, and set his balance back to $0.00 where it remains now, months later.
I don’t mean to say there shouldn’t be some penalty for overdrawing or goofing-up, but the punishment automatically meted by the bank seemed to be a crime in itself.
He knows that the bank officer will not bail him out again.
I should also note that the limits I mention above only apply to US accounts in US banks.
Mod, do you have a contact for this article??
This just happened to us, to the tune of $300 in fees. They ‘forgave’ $90 since we’re longtime customers (not for much longer), but “it’s not bank policy to refund fees when it’s not a bank error.”
(Only a horrible, yet ‘legal’, policy)
They purposefully wait until midnight to clear all of the day’s transactions, and then pay in them in order from largest to smallest. That way, when the money runs out, it’s a bunch of small pending items each triggering a NSF fee, instead of say the biggest transaction only generating one fee. No matter that your card charges were approved before the mortgage payment was generated through Online Bill Pay. It is a scam!
I have sent complaints till I am blue, including to the Office of the Comptroller of Currency. Hadn’t thought of the FDIC, though.
It is highway robbery!
The FAIR Overdraft Coverage Act will rein in abusive fees, give customers greater choice, and bring greater transparency to these programs. The bill would:
Limit the number of overdraft coverage fees banks can charge to one per month and six per year;
* Require fees be proportional to the cost of processing the overdraft;
* Stop institutions from manipulating the order in which they post transactions in order to rack up extra fees,
* Require customers be notified when they overdraw their account and be given the option of being notified by email, text or traditional mail; and
* Require that customers be warned if an ATM or branch teller transaction will overdraw their account, and be given the chance to cancel the transaction.
that Fair Bill (also known as S. 1799 FAIR Overdraft Coverage Act) is currently in the Senate Banking Committee. Charles Schumer, senior Senator from NY is a member of that committee.
I think the lesson we tried to teach the boy was how to responsibly use a checking account and debit card. The lesson he learned seems to have been, avoid checking accounts and debit cards. The extent that the bank came down on him for a small ($.16, entirely his fault) seems to have soured him on that idea. Not only did they ruin the lesson we were trying to teach, but they seem to have lost themselves a customer.
We’ll try again in a few months, perhaps with a friendlier bank or a new law.
-The need for regulation and government oversight of industry (specifically banking in this case), to protect consumers from predatory tactics.
. . .
The govt. is just as sneaky with its imposition of direct and indirect taxes.
Since you feel the government is just as sneaky, what makes you believe they can provide decent oversight of any industry? In which industry have they proven themselves so far?
this whole topic is stupid…DON’T OVERDRAW!!! ITS AS SIMPLE AS THAT!!! IF YOU DON’T HAVE THE MONEY DON’T SPEND IT!!! last week i heard a speech from Rabbi Moshe Meir Weiss, in which he said, that as abhorrent as we all find Esav, we all have a part of his middos in us (albeit a dakei dakos…). Esav was called Edom because of when he told Yaakov “give me this red stuff now!” he didnt look to see what it was, whether it was lentils, or whatever…he just wanted it. and he wanted it NOW!!! are you beginning to see the point? coming onto the overdraft protection because “the deals are just so darn good, and i just gotta have this now!” is on a certain level the middah if Esav! CALM DOWN!!! you live all year without a black friday sale…live for another week. the deals will still be there until January first! calm down, learn to have patience and you will have a calmer more peaceful life. besides…Marbeh N’chasim…Marbe D’agah :D:D:D
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