"Overdraft protection" for debit cards

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Anaxagoras
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"Overdraft protection" for debit cards

Post by Anaxagoras »

Banks figure out a new way to pick your pocket
When Peter Means returned to graduate school after a career as a civil servant, he turned to a debit card to help him spend his money more carefully.

So he was stunned when his bank charged him seven $34 fees to cover seven purchases when there was not enough cash in his account, notifying him only afterward. He paid $4.14 for a coffee at Starbucks — and a $34 fee. He got the $6.50 student discount at the movie theater — but no discount on the $34 fee. He paid $6.76 at Lowe’s for screws — and yet another $34 fee. All told, he owed $238 in extra charges for just a day’s worth of activity.

Mr. Means, who is 59 and lives in Colorado, figured employees at his bank, Wells Fargo, would show some mercy since each purchase was less than $12. In addition, a deposit from a few days earlier would have covered everything had it not taken days to clear. But they would not budge.

Banks and credit unions have long pitched debit cards as a convenient and prudent way to buy. But a growing number are now allowing consumers to exceed their balances — for a price.

Banks market it as overdraft protection, and the fees it generates have become an important source of income for the banking industry at a time of big losses inother operations. This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance.

In fact, banks now make more covering overdrafts than they do on penalty fees from credit cards.

But because consumers use debit cards far more often than credit cards, a cascade of fees can be set off quickly, often for people who are least able to afford it. Some banks further increase their revenue by manipulating the order of a customer’s transactions in a way that causes more of them to incur overdraft fees.
"Overdraft protection" my ass. Caveat emptor and all, but this is whacked. Seems like he got back the only way he could though (telling a reporter).

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Post by asthmatic camel »

This has been a big problem here for years. Even back in my banking days, some fifteen years ago, we were charging £25 to return a cheque or direct debit, or simply to write a letter informing the customers that they had gone overdrawn/exceeded an overdraft limit. After a great deal of pressure from the press, many people have succeeded in reclaiming extortionate fees, and the banks are finally reducing their fees to more realistic levels. Linky

Looks like your man has the right idea!
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Post by Pyrrho »

Moral of the story: don't spend what you don't have.

Keyword: budget.
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Post by Doctor X »

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Post by asthmatic camel »

Pyrrho wrote:Moral of the story: don't spend what you don't have.

Keyword: budget.
Agreed. I have little sympathy for feckless spendthrifts who are the author of their own misfortunes. Where this becomes unfair is when an otherwise responsible person, struggling to survive on a tight budget, miscalculates and gets caught in the trap of ever-increasing debt entirely due to bank charges. It can't be right that one mistake can lead to hundreds or even thousands of £/$ in bank charges, can it? Especially when most people don't have the option of being paid in cash; having a bank account is now pretty much a condition of employment here.
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Post by Doctor X »

Particularly when the banks delay deposits but are more than happy to immediately slap you with a fine.

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Post by gnome »

I had "overdraft protection" for a while until I realized that it was only useful to keep a large sum from bouncing and getting a fee from the bank AND the vendor. Instead I just kept getting hit at the end of my pay period for small purchases because I thought I had more money than I did. My own fault, not the banks. But it was costing me more than it could ever save me, so I had them turn it off.

I'm all for people budgeting carefully, but I'm not one for "gotcha" banking. So far my credit union does not manipulate the order of transactions to increase their fees, as some do--putting the big charge in first to throw it negative, then dropping in all the little ones so that each one gets the $25 fee. If I caught my bank doing that I'd switch banks until I found one that didn't.

What is the justification for holding deposits anymore anyway? You can't tell me these funds can't be verified in seconds, electronically.
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Post by Grammatron »

It's a shitty things for banks to do, but I don't feel bad for someone who is using the money they don't have to buy overpriced crap from starbucks and go to the movies.

Also, he's a graduate student. Read the fine print idiot!

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Post by Nyarlathotep »

gnome wrote:
What is the justification for holding deposits anymore anyway? You can't tell me these funds can't be verified in seconds, electronically.
To increase the odds you'll have an overdraft, basically.

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Post by izittrue »

I have overdraft protection for my overdraft protection.
Actually my bank doesn't charge me...go figure...
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Post by Llacheu »

The con man who was stealing from my mother talked her into getting the so-called "overdraft" protection which was basically a line of credit. It gave him $5000 more to steal.

Anything so easy to abuse is not something I want.
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Post by gnome »

That's the OLD kind of overdraft protection...

The new kind it's not even actual credit, it's just an overdraft fee for transactions that should be declined instead.
"If fighting is sure to result in victory, then you must fight! Sun Tzu said that, and I'd say he knows a little bit more about fighting than you do, pal, because he invented it, and then he perfected it so that no living man could best him in the ring of honor. Then, he used his fight money to buy two of every animal on earth, and then he herded them onto a boat, and then he beat the crap out of every single one. And from that day forward any time a bunch of animals are together in one place it's called a zoo! (Beat) Unless it's a farm!"
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Post by clarsct »

Hrm. My debit card is through a credit union. If I overdraft, and have the funds in the savings to cover it, I get a $3 fee.

If I do not, I get a $15 fee.

Very few times have I had to have a fee paid.

Seems reasonable, actually. Read the whole contract on your debit card. I did so..took me about 40 minutes. The banker who was helping me set it up looked pissed, but it's my fucking card, my fucking money, and she's paid by the hour.

Least, that was the way I saw it.
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Post by asthmatic camel »

Just out of curiosity, I believe it's the case that passing a cheque for which you don't have covering funds is a criminal offence in the USA. Does this also apply to debit card and other transactions?
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Post by Abdul Alhazred »

asthmatic camel wrote:Just out of curiosity, I believe it's the case that passing a cheque for which you don't have covering funds is a criminal offence in the USA. Does this also apply to debit card and other transactions?
Only if deliberate fraud is involved.

No one tries to make a case unless it is a huge amount of money or a persistent pattern.
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Post by clarsct »

If you write yourself a check and overdraft yourself, they will have quite the stern talk with you...or so a young lady of my acquaintance avers.

But I wouldn't really know.
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Post by gnome »

To put things into perspective, I met a Pakistanian (is that the right term?) at my college some years ago. He marveled at how debt was handled in the US--he had a hard time believing that you could owe someone thousands of dollars and all they can do is phone you.

In his home country, he said, there would be people at your door.
"If fighting is sure to result in victory, then you must fight! Sun Tzu said that, and I'd say he knows a little bit more about fighting than you do, pal, because he invented it, and then he perfected it so that no living man could best him in the ring of honor. Then, he used his fight money to buy two of every animal on earth, and then he herded them onto a boat, and then he beat the crap out of every single one. And from that day forward any time a bunch of animals are together in one place it's called a zoo! (Beat) Unless it's a farm!"
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Post by Grammatron »

gnome wrote:To put things into perspective, I met a Pakistanian (is that the right term?) at my college some years ago. He marveled at how debt was handled in the US--he had a hard time believing that you could owe someone thousands of dollars and all they can do is phone you.

In his home country, he said, there would be people at your door.
Well it depends who you borrow money from. If you owe certain people thousands of dollars, there will also be people at your door.

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Post by Abdul Alhazred »

Grammatron wrote:Well it depends who you borrow money from. If you owe certain people thousands of dollars, there will also be people at your door.
... and he doesn't mean Pakistanis. 8)
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Post by hammegk »

Abdul Alhazred wrote:
Grammatron wrote:Well it depends who you borrow money from. If you owe certain people thousands of dollars, there will also be people at your door.
... and he doesn't mean Pakistanis. 8)
Punjabis with baseball bats, knives, and guns maybe?
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