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Overspending on Debit Cards Is a Boon for Banks
The New York Times ^ | 08 Sep 2009 | RON LIEBER and ANDREW MARTIN

Posted on 09/09/2009 10:21:54 AM PDT by BGHater

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 in other 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.


(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy
KEYWORDS: banks; debitcards; debt; economy
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To: NMEwithin

You obviously do just fine with your finances. There are those of us, however, that have had issues with banks posting deposits late. This has happened several times with our B of Am accounts. Luckily, it took a simple discussion with the bank mgr. to reverse the charges.

Those of us that run small businesses have to deal with things like late payments from customers—that can really eat into cash flow. Which in turn, affects our payments. It’s happening more and more, and is pretty indicative the the economy is not “on the mend”.


41 posted on 09/09/2009 10:54:34 AM PDT by Aggie Mama
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To: griswold3

This happened to me. I transferred a grand to my checking account at the ATM at the bank. Then I went shopping. I was hit with $125 worth of overdraft charges for using my Debit Card! When I went to the bank’s manager to complain, he informed me that ATM transfers take overnight to go through. That hadn’t occurred to me! Transfers at the teller’s window go through immediately. As I was a customer of that bank for over 30 years, they dropped the charges, and I learned a lesson! Use the tellers!


42 posted on 09/09/2009 10:55:14 AM PDT by Dr. Bogus Pachysandra ( Ya can't pick up a turd by the clean end!)
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To: BGHater

$4.14 for a coffee at Starbucks
$6.50 student discount at the movie theater
He paid $6.76 at Lowe’s for screws
**************************
Each of these items should have come out of an envelope marked “Blow $” and sufficiently filled with cash at the beginning of the month. He would then only have to manage one ATM withdrawal a month.


43 posted on 09/09/2009 10:55:59 AM PDT by CSM (Business is too big too fail... Government is too big to succeed... I am too small to matter...)
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To: BGHater

$40 billion in over draft charges last year...that’s unreal. The banks are catching a lot of flak for this practice and I imagine that it won’t be long until they are forced to stop either because of lawsuits or gov’t intervention.


44 posted on 09/09/2009 10:56:38 AM PDT by lwd
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To: AZConcervative
"Careful. Banks will credit a deposited check and it shows on-line as available, then in three days they find out the funds for that check are no good and they go back and charge you fees for being “overdrawn” even though on-line it showed you had an available balance."

Sure they will, below some given amount.
They also slap a hold of three to ten days on larger checks, or questionable checks, or even payroll checks - and you (or I) get all ticked off because the money isn't available despite its being a "perfectly good check".

The solution is to understand that banks are in business to make money and to actually keep an eye on what you have and what you spend. Debit cards themselves aren't the culprit although they DO require more work in order to keep your balance straight.

45 posted on 09/09/2009 10:57:23 AM PDT by norton
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To: ravingnutter
The abuse is that they permit the transaction to go through so that they can charge you the $34 on a $2 coffee. If you don't have the money, they should deny the transaction, unless you have agreed to or requested that they give you money even when it is not in your account.

Sure, people should know how much is in their account, but stuff happens, and if they make a mistake, the charges are seriously excessive and designed to give the bank an extra source of revenue, not to protect the bank from the danger of overdrawn accounts and the administrative costs of that.

46 posted on 09/09/2009 10:57:35 AM PDT by Defiant (Baby Boomers: The first generation in human history to not want to become adults, and they haven't.)
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To: BGHater

Oh the Humanity!!!

I can’t believe a poor person getting fined for spending money he didn’t have!

Ever hear of over-draft protection bud?


47 posted on 09/09/2009 10:57:57 AM PDT by mowowie
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To: BGHater; All
How many of the people commenting that the guy is an idiot, he oughtta learn how to balance his checkbook, etc., bothered to read this line from the article:

In addition, a deposit from a few days earlier would have covered everything had it not taken days to clear.

In other words, THE BANK FAILED TO PROCESS HIS DEPOSIT!!! That's a complete scam. Not only should he pay no penalties, but the bank should also reimburse him for interest that should have been earned while they were dragging their feet.

The banks can sure as hell take money OUT of my account instantly - money I put into my account should go in just as fast.

In other words, let's say I deposit $500 on Monday. Tuesday through Friday, I spend $300. Am I being foolish or reckless? Hell no, I deposited $500 and have $200 to spare. If the bank fails to deposit the check until Friday, the bank is at fault - not me.

48 posted on 09/09/2009 10:58:15 AM PDT by Terabitten (Vets wrote a blank check, payable to the Constitution, for an amount up to and including their life.)
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To: Hoosier Catholic Momma

Ha, well officially without a post to prove your presence, then it ain’t official! ;-)

Keep living like no one else, it will be amazingly worth it. I’m still trying to wrap my arms around banking cash instead of paying on debt. For some reason it isn’t as exciting, but that is because my thought hasn’t had time to shift yet.

I use cash for everything, however I do have to execute a 1 time ATM withdrawl to fill my envelopes. I have no issue managing my bank accounts.


49 posted on 09/09/2009 11:00:21 AM PDT by CSM (Business is too big too fail... Government is too big to succeed... I am too small to matter...)
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To: NMEwithin
I can check my account balance on my cell phone. Therefore, I never overspend with my debit card. People get whacked with overdraft charges because they are too stupid or irresponsible to keep track of their finances.

If that were the whole story you'd be right. But intentionally posting the transactions in the order likely to generate the most fees is bad faith on the part of the bank. They either take an agnostic approach and post them in the order of occurrence or do so in the order that will generate the FEWEST overdrafts. You pay them a fee every month after all, they're working for you.

50 posted on 09/09/2009 11:01:02 AM PDT by Still Thinking (If ignorance is bliss, liberals must be ecstatic!)
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To: Terabitten

The way his bank works, which is my bank so I know from experience, is that they hold back a certain amount of your deposit, making it not available, until they know the checks you deposited will all clear the bank upon which they are drawn(which usually takes between 1-5 days). If you look on your online account, you can see what available funds you have each day, and it is specifically explained there.


51 posted on 09/09/2009 11:01:30 AM PDT by keepitreal ( Don't tread on me.)
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To: CSM
Each of these items should have come out of an envelope marked “Blow $” and sufficiently filled with cash at the beginning of the month.

Sure. He knows that now...

52 posted on 09/09/2009 11:01:49 AM PDT by Petronski (In Germany they came first for the Communists, And I didn't speak up because I wasn't a Communist...)
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To: cynwoody
If funds are insufficient, it can simply decline the transaction

And they used to do just that. Charging massive fees is a relatively new phenomenon.

Maybe that's why they went from calling them "debit cards" to "Check cards."

53 posted on 09/09/2009 11:02:09 AM PDT by Terabitten (Vets wrote a blank check, payable to the Constitution, for an amount up to and including their life.)
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To: GOPJ

Yes, they should simply deny the charges. Or allow the customer to configure the account either to deny or pay the charges incurring an overdraft fee. They shouldn’t be able to make a decision on the basis of the fact that it’s adverse to your interests. You’re the customer.


54 posted on 09/09/2009 11:03:43 AM PDT by Still Thinking (If ignorance is bliss, liberals must be ecstatic!)
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To: Petronski

“Sure. He knows that now...”

Cash is not a new concept for a 59 year old.


55 posted on 09/09/2009 11:05:31 AM PDT by CSM (Business is too big too fail... Government is too big to succeed... I am too small to matter...)
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To: keepitreal
The way his bank works, which is my bank so I know from experience, is that they hold back a certain amount of your deposit, making it not available, until they know the checks you deposited will all clear the bank upon which they are drawn(which usually takes between 1-5 days).

Yuck. Makes me glad I use USAA. I can deposit checks from home (scan them from my home computer) and the money is available *instantly.*en 10 minutes to the restaurant to get something to eat using the money

56 posted on 09/09/2009 11:06:14 AM PDT by Terabitten (Vets wrote a blank check, payable to the Constitution, for an amount up to and including their life.)
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To: jrg
bouncing checks....which is what this really is....is a lesson probably most of we mere mortal freepers have done...

its the "stupid tax"....

live and learn....

next time this guy won't be so careless.....

57 posted on 09/09/2009 11:06:52 AM PDT by cherry
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To: NMEwithin
Debit cards work through Visa or MasterCard. They do not have instant access to your checking account. Sometimes it can take several minutes for the transaction to complete from the retailer through Visa or MasterCard then to your bank. By then you could be out of the store and long gone only to find out your transaction bounced if you didn't have overdraft protection. In that case, the fees would be much, much worse, from not only your bank, but also Visa or MasterCard and maybe even the retailer's bank.
58 posted on 09/09/2009 11:07:16 AM PDT by Dixie Yooper (Ephesians 6:11)
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To: Dixie Yooper

All true. But the banks should then post any debits in the order that they occurred, not in the order that generates the most fees for them. It’s blatantly dishonest.


59 posted on 09/09/2009 11:09:38 AM PDT by SoothingDave
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To: Fido969

Maybe the government should take over your checking account for you so these kinds of won’t happen...


60 posted on 09/09/2009 11:10:17 AM PDT by Dixie Yooper (Ephesians 6:11)
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