It is hard to break the habit of using plastic for your purchases. But many people got tired of the revolving credit that turned an ordinary purchase into one that sometimes cost four times more than originally bought. People turned to debit cards because there was no interest to pay for the transaction. Good enough. But is that all there is?
Other Fees
With debit cards, one simply pays for the item by making an electronic withdrawal to the checking account. But what if one is short? If one has 10 dollars in the account and the item one is buying costs 11 dollars. One is overdrawn. Now two things could happen. The bank rejects the purchase on the spot, for lack of funds. The other is that the bank accepts the transaction but saddles the buyer with overdraft fees of 39 dollars or more. Therefore, an 11-dollar purchase now costs 50 dollars. In addition some banks have even been reported as charging 25 cents per debit card transaction.
Overdraft fees are one way that the banks can take advantage of your sloppy purchasing habits. Do not misunderstand; if the customer is overdrawn, that is the customer’s fault. However, the banks seem to use that precarious buying habit formula to their advantage by enrolling the bank customer into a program that will make charge penalty fees whether one signs up the program or not.
Federal regulators have not been proactive in protecting banking consumers over the past ten years. Too many banking and investing practices have evolved without the watchdog overview of the SEC, the Federal Reserve, or other financial regulators.
This has turned into a windfall for many banks. According Moebs Services, who state that “This is the first time in our 22-year history of collecting this data that we have seen OD (overdraft) fees increase during a recession.”
Here are some facts to consider: Almost 45 percent of all banks and credit unions have overdraft income greater than their net income. Wall Street Banks lead other banking intuitions with higher OD fees. They charged an average of $35 per overdraft vs. $26 per overdraft for all other types of financial intuitions.
Lack of Protection
One of the problems with debit transactions is that one has less protection if something goes wrong. When a purchase occurs, the money is immediately removed from the account. But what if something happens to the purchase? The bank won't put money back into the account for items that are never delivered, don't work or were misrepresented.
Secondly, a debit card acts like a blank check, so one needs to guard the account number carefully against loss or misuse. A thief can clear out the account before one even knows that the card is missing. All a thief needs is a name and card number. Online or phone transactions can take place easily. So the possibility of misuse is easy also.
Normally, there are some safeguards. The most one can lose is $50 if you report to the bank or credit union that your card is lost or stolen within two days of when one discovers the card loss. However, liability increases to a maximum of $500 if one reports the loss within 60 days after receipt of the bank statement. But there is a big problem if one does not to notify the bank within 60 days after receipt of the bank statement, then the liability is unlimited. One could lose all the money in the account.
Debit cards are a functional way of paying bills without having to deal with finance or interest charges. They are very popular now, even surpassing credit card purchasing according to CreditCards.com. But watch out. They can be fraught with unseen financial elements and practices.
George Garza - I have been in the computer industry for 25 years. I have several certifications including MCSE, MCSA, MCT, MCTS, MCITP, CCNA,CCNP,A+,and ...
