Debit Cards are the New Cash Cow for Banks
September 10, 2009

The Credit Card Act that took effect this year, coupled with the recession, has created a void where many fees have been collected in the past. What pays banks more than penalty fees on credit cards? You may be surprised to learn that it is overdraft fees on debit cards.

Debit cards have been marketed as similar to an ATM. When the money is gone, you can’t make a transaction. However, since most are now endorsed by Visa, banks are covering transactions, and charging large fees when the transaction occurs on a negative account.

What does this mean to you? Even if you don’t have the funds to cover a transaction, it may still be approved. In which case, be prepared for your bank to charge you $20 or more for that transaction. Those fees can easily add up to more than is possible to cover. If you, or someone you know, is in this situation, contact your financial institution. You may have to opt out of the provided overdraft protection. But it’s worth it.

Debit cards are becoming more and more like a checkbook. Which is why it is more important now than ever, to reconcile those accounts on a regular basis. In this age of electronics, many people are relying heavily on bank balances as an indicator of funds available. Make sure to keep your own check register, or log of what you have spent, so that you don’t fall victim to one of these fees.

For more about the debate in Washington, Click Here to read the New York Times article published this week.

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