Debit whammy

NY Post ^ | August 08, 2010 | Catherine Curan

[CutePuppy]

A week from today, one in 10 New Yorkers who use debit cards will be red-faced at a retail checkout counter when their cards are declined.

That's because Aug. 15 is the kickoff day for new federal rules requiring existing bank and credit union customers to opt in for debit-card and ATM overdraft coverage -- a massive change in banking regulation that many consumers have ignored or failed to notice.

The choice for customers is this: Opt in to overdraft coverage, meaning you can use your debit card even if you overdraw your account, but pay a $20-$30 penalty every time you do so. Or, don't opt in, and your debit card will be declined if you try to spend money you don't have.

By choosing the August date for this switch, the Federal Reserve has inadvertently set up consumers for an ugly Sunday, said economist Mike Moebs, CEO of Moebs Services. He estimates that at least 2 million metro area residents will be caught flatfooted by the change.

This date packs a double whammy because it falls in the busy back-to-school shopping season and lands smack in the middle of the monthly payroll cycle.

Since Aug. 15 is a Sunday, employers can choose to pay workers the Friday before or the Monday after. Consumers who expect payment Friday -- and count on overdraft protection if they fall short -- will see a nasty surprise. When employers have this kind of choice, about one-third opt to delay payday until Monday, said Moebs.

.....

After being embarrassed, people are likely to call their banks and opt in for overdraft coverage at any price, helping banks retain roughly $3 billion in revenue from non-sufficient fund charges and ATM fees, according to Moebs' calculations.

.....

[CutePuppy]

Thank you, o dear Government, for giving us each day our daily misery.

Now that Dodd-Frank's FinReg starts its life in infamy, the "big bad evil greedy Wall Street" banks will need to recoup the lost income "on the backs of" the consumers, by charging them more or charging for the services that used to be "free"...

Of course, the politicians will again feign ignorance and outrage and point the fingers at the service providers, from which they so diligently worked to "protect the consumers" in the first place. God save us from the government "protectors" and their Mafia protezione.

Timeo Danaos et dona ferentes.

[Larry Lucido]

Yeah? So?

[paulycy]

“Or, don’t opt in, and your debit card will be declined if you try to spend money you don’t have. “

Sounds reasonable to me. I never tested it but assumed it already worked this way.

They needed a law for this?

[Mountain Troll]

I may be missing something here, but can’t people just keep track of how much money’s in their account? Is it really that hard?

[gleeaikin]

Frankly I am glad that people have to think about their choices. I did not know that there wasn’t a reject aspect to my Debit card. Thus I was astonished to discover a $500 + charge of overdrafts on my Debit card. I had not had time to bring my check book accounting up to date, but thought I had enough to pay for the small charges I was debiting until my Social Security was automatically deposited. A large check that I had written about 5 months earlier was cashed throwing me into the minus column. Fortunately, my bank waived all but one of the $39 fees. So I am glad that my Debit card will be rejected if it goes over my balance.

[MrEdd]

The Obama Government is now upset at people who insist on living within their means, and refusing to take on debt.

[Graybeard58]

I never tested it but assumed it already worked this way.

So did I. It never occurred to me to try to spend more on my debit account than what I had in there.

[paulycy]

What the heck do they use computers for if they don’t keep people from spending money they don’t have?

Maybe I’m just too naive. But I doubt it. There’s money in there for the banks somehow - I guess on the overdraft fees.

Thank God I learned not to make use of such things as overdraft protection.

I prefer to simply spend less. (Not that I really have that much choice to begin with...)

[GeronL]

I am sure the declined card will bring a $35 charge too

[paulycy]

Yeah, they gotta have the electronic version of bounced checks to make a ton of money at once.

Putting yourself in the position to have to pay $35 just for writing a check? Only in a dire emergency or unfortunate miscalculation when balancing the checkbook.

Oh. Debit cards don’t use checkbooks.

At least you used to know you were out of money when you ran out of checks... ;0)

[Darth Reardon]

It can be. Banks do not process deposits and withdraws immediately, and some times not in order. Ever see the line about deposits not being immediately available for withdraw?

I’ve heard that some of them even process a batch of withdraws by doing the larger ones first. That way, even if only the last withdraw you made during the batch being processed actually put you a little bit overdrawn, they can charge you an overdraw fee on multiple transactions. And those extra charges can leave you with a negative balance when you think you should be positive.

Of course, knowing how the system works, yeah you should protect yourself from it. But I suspect most people don’t know until they get burned by it.

[major-pelham]

Debit card charges approved at the point-of-sale into bad funds is an extension of credit that includes re-payment risk. Its not underwritten so the charges (i.e. the price of the service) are very high.

The consumers that use this service find it a Godsend on Wednesday nights when they need milk bread diapers formula or new tires or what have you. Everyone whines about it, but its credit granting and its a business and no one would lend any money out for free.

The do-gooders don’t like it and they got the rules changed. The people that use it, like it. They will try not to use it, but they will. So now the lefty’s got their law change and we all shall see.

[Libertynotfree]

Because the Gov. allows the bank to hold on your check deposit longer.

[radioone]

At least our “progressive friends” will be happy to know even the evil-wealthy will also be hit with this charge if they overdraw their account. Social Justice.

[hosepipe]

Pretty much always been that way... on debit cards.. 30$+ charge..

[Graybeard58]

My wife and I have $3000 in our checking that we don’t even write into our checking balance. Sometimes our check book balance shows a negative balance of $100 or $200 but it isn’t really negative.

We also practice a little creative check book entries whereby when we make a purchase we “round up” to the nearest $10 figure. If something costs $41.25, we enter and deduct $50. I keep track of the excess build up and when it reaches $1,000 (Above the $3000) I transfer it into savings - it takes quite a while for it to reach that figure but it does get there eventually and we have our very own Christmas Club!

The pass book rate is a whopping .7% (Please note the decimal point)

[silverleaf]

If you don’t have the money, your debit card is declined?
You mean, kind of like, uhhh, checks?

What is misery about that? Sounds like financial reform to me!

[CutePuppy]

"It's a critical time," said Moebs. "Lots of people are going to be strapped for cash." .....

The new opt-in provision matters a lot to banks, since 41 percent of all reported non-sufficient funds transactions occurred at point-of-sale debit transactions, while 8 percent were at ATMs.

Ignorance of the new overdraft regulations is widespread. According to a June survey by the Nielsen Co., a whopping 39 percent of consumers were undecided about the coverage.

Many had "no idea there was an opt-in/opt-out option."

Consumers are clueless despite a full-scale publicity blitz by banks. Walk past any major bank branch in the city these days, and you'll see signs about overdraft coverage. .....

Nessa Feddis, senior counsel at the American Bankers Association, says banks are reporting high opt-in rates -- more than 50 percent for some banks -- among consumers who have previously used overdraft coverage. According to the Nielsen Co.'s study, well-paid managerial or white-collar workers who own their own homes were more likely to opt in. People earning less than $30,000 a year were more likely to be undecided.

Those who said they'd opt in wanted to avoid embarrassment at checkout and have a backup in case of emergency. .....

The people who need the [even expensive] credit or services the most will be without it or pay more for it, courtesy of new "consumer protections" enacted by the government do-gooders.

[paulycy]

““round up” to the nearest $10 figure”

I’ve heard of rounding up to the dollar, but your plan is better. That’s why you are $3K to the good.

Great process. Great results.

Congrats.

[paulycy]

“The do-gooders don’t like it and they got the rules changed. “

Since I haven’t really thought about this subject much I should keep my mouth shut (But I won’t ;0). I don’t get out much and my wife does the payments, although we discuss everything.

But unless the free market is being dishonest somehow I don’t think the govt ought to mess with it. Granting “credit” costs money and has consequences. People need to understand that and... hey! Don’t spend money you don’t have, even on diapers and milk. That is a very expensive way to do it when better planning could reduce costs.

We’ve had emergencies, too, so the service should exist. But spending yourself bankrupt through neglecting to plan is not the govts fault and by that I mean it’s not the TAXPAYERS’ fault.

Been there. Done it. Survived.