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.

.....

[R. Scott]

I use my debit card often, I dislike carrying much cash. I also carry a credit card for some purchases, notably gas. It often takes several days for the purchase to show up at my credit union when using debit and I check my account online daily after deducting debit purchases. It takes less than 5 minutes. I don’t worry about the high interest rate on credit cards, I pay the entire balance every month.

[CutePuppy]

But I have more debit card entries than check entries on the stubs.

I also carry a credit card for some purchases, notably gas. ... I don’t worry about the high interest rate on credit cards, I pay the entire balance every month.

You are doing it right; and in the case of credit cards, you also retain control of payment timing and the convenience of "floating" some of the expense. If you have more than one credit card you can also separate expenses for convenience, longer "float" or accounting.

[Republic of Texas]

I’m with you. I always assumed if the money wasn’t there, the card wouldn’t work.

[paulycy]

“I always assumed if the money wasn’t there, the card wouldn’t work.”

I’m going to continue to believe it.

It’s worked out OK so far.

[WVNan]

Yes, I do that too. We paid down all of our credit cards when obammy took office. Also paid off all debts, including house. Getting set for the hard times. Cut spending except for food for the long haul. Clothes come from Goodwill. Neighbors with cows & chickens. River right outside the yard if there is need for water. plenty of woods for gathering deadwood for heat. Only worry about young people who have always had everything they wanted instantly. It’s going to be a hard lesson for them. Me, I lived through the Great Depression. You learn what is really important.