Debit Cards and Overdraft fees

[jimmoyer]

Hey Darkbeaver, I recalled all your screeds against the bankers of the world. You might like this proposal for the world of banking all over the globe.

• Do not read any further if you use only cash or you always have enough cushion in your checking account to never worry about overdraft fees.
• This article is for those of you who have had overdraft fees and use a debit card
• Imagine a banking system that allows people to withdraw more money than they have. Imagine banks allowing people to have a negative balance. Imagine 18 year olds who don’t understand how this can happen. Or for that matter imagine any age group that often gets surprised by this wonderful privilege of being able to overdraw.
• Imagine that the debit card you use is not always an immediate transaction. For example some gas stations will charge your account a dollar immediately and then 2 or 3 days later will get the rest of the money out of your account. People discover this delayed transaction the hard way. Thinking that they’ve already paid the gas station they wrongly assume their balance indicates what they have left after all their transactions. Wrong! All people on tight budgets discover this the hard way with an overdraft fee.
• Propose a law at point of sale. As soon as your debit card is swiped through the reader or scanned, why not have a prompt, “You are about to overdraw. Continue? Yes or No.”

Those stuck with the bill at a restaurant with no other resource might elect YES. Should they have known ahead of time? Should they have been more vigilant and responsible? Of course. But why create a system where the odds of miscalculation favor the bank instead of you?

• Imagine the countless hours of saved time for both banking employees answering irate customer inquiries and countless hours of times for those with tight budgets who must constantly monitor their account.
• Even the most responsible who watch their transactions and watch their check book can sometimes err because of one major problem: All our transactions by debit card are not immediate. We were used to no transactions being immediate in the past when we had a banking system that did not allow overdrafts.
• The major reality is that banks allow you to overdraft because these are the days of direct deposit and banks not only get their money back that way, but they also get to charge you a 25 dollar overdraft fee for the 3 dollar cheeseburger you shouldn’t have purchased. This is a huge revenue stream mostly done at the expense of the very young who don’t know any better, or of our young soldiers in the armed services who have little bank accounts, or by anyone with a tight budget or of anyone who does NOT have web access to their bank account. By the way having web site access allows you to monitor more efficiently any delayed or pending transactions.
• Imagine a system where the odds of any miscalculation favor the dealer, um, I mean the bank. And then stack the odds in their favor with the Big Bailout by both Presidents Bush and Obama.

 

[karrie]

I like the low cost alternative... teach your kids, yourself, whoever's having this issue, to use a balance book.

 

[jimmoyer]

Hey karrie !

I worry that PERSONAL RESPONSIBILITY blinds us to the fact that the banking system has stacked the odds in its own favor at the expense of those with tight budgets.

I've always been fortunate to have enough cushion in the checking account to not worry.

If it's easy for Walmart to scan your check and run it through immediately so the bank can charge you a return check fee, what does it hurt to have that debit card reader prompt:

You are about to Overdraft? Continue? Click on YES or NO.

Like I say, this is a courtesy. Most people with restricted budgets don't have web access to their bank account where they can learn that gas stations ping you a dollar and then 2 or 3 days later collect their money. With web access to your bank account you learn these things. You learn that your balance does not mean everybody has collected their money yet.

Why do banks allow you to overdraft? Because they can easily collect it back from your direct deposit and still charge you a 25 dollar fee for the 3 dollar cheeseburger you shouldn't have had.

Why stack this in their favor?

Did we purposely design the system in favor of the big boys?

 

[Ron in Regina]

$25 per overdraft fee? I think I noticed a sign in my bank that said $38/overdraft item.
That's chunky.

I don't know where you bank or what the deal is, but my debit transactions seem to
come out of my chequing account immediately. Could this be a difference between
Canadian & American Banking systems, and thus the reason so few have touched
this Thread so far?

One of my accounts has three small items come out of it (auto insurance, a small life
insurance policy, and a bank fee) which combined are about $85.00 or so....
meaning that the potential is there for me to be able to accrew three overdraft fees
(per transaction for three transactions) of $38 each ($114 together) owing on top of
the origional $85 if money isn't in that account at the right time. It's a non-issue for
me becouse I make darn sure I never put myself into that possition...but again the
potential is there....

 

[jimmoyer]

This is an arcane issue for most.

1. Anyone who still uses all cash won't care.
2. Anyone who always has enough cushion in their checking account won't care
3. Anyone who doesn't have web access to their bank account won't know that many debit card transactions are not immediate.
4. And the issue of PERSONAL RESPONSIBILITY will blind most in not seeing the big naked elephant in the room, that of stacking the odds of miscalculation in favor of the dealer, um, I mean the bank.

You didn't mention gas stations. Gas stations will typically do one of two things.
They may put a hold on your checking account for much more than you gassed up for. Or the more modern gas station systems ping you for a dollar the day you swipe your debit card through the reader. Then 2 or 3 days later they take the full amount out of your checking account.

The only people who discover this are those who see this on their web site access to their bank account or those who stumbled into an overdraft fee and get this explained to him. Or her.

 

[AnnaG]

3 extremely foul creatures:
politicians,
lawyers,
bankers.
Never trust them or give them a door to your pocketbook because they are no better than muggers.

 

[jimmoyer]

The first portal to look into this gigantic swindle is the question you have to ask:

Why did banks allow people to overdraw?

You may find a dismissive answer and pat yourself on the back.

Or

You might find out the real reason why.

 

[Kreskin]

This would be a US issue. Canada's system works pretty good.

 

[jimmoyer]

Can you view your bank account online?

Any Canadian who can I am interested in what they find out.

The gas companies are trans-border, so you might want to verify this. You run into many people who have never seen the transactions online and how they look and never knew that the gas stations do what I described.

 

[Ron in Regina]

Gas Stations, Grocery & Retail & Convenience stores....they all come out of my
Account immediately. If a company charged a separate fee (the $1.00 you
mention), it's part of the same transaction as the purchase you've made there &
comes out at the same time. Well...it does here anyway....where you are it may
(& it very much sounds like it) work differently.

I can hit a FasGas (Service Station) on the way to work, then drive the next six
blocks & check my account, & it's right there. Done & accounted for.

I really think you're describing something that doesn't happen here, but does
happen where you are, and thus the reactions you're receiving.

Yes.....I can (& do) check my account online.

 

[jimmoyer]

Always good to compare notes. I live in a bubble down here, so it's good to know.

When you say you drive the next 6 blocks and check your account, how do you check your account? Do you on your banking web site and actually see the transaction or are you just looking at a balance on an atm machine?

 

[Kreskin]

In the Canadian system once you make a transaction electronically it is logged in the electronic balance so that if you immediately go to a different retailer or ATM it knows what your available balance is.

 

[Ron in Regina]

Always good to compare notes. I live in a bubble down here, so it's good to know.

When you say you drive the next 6 blocks and check your account, how do you check your account? Do you on your banking web site and actually see the transaction or are you just looking at a balance on an atm machine?

On my Office Computer, One block down and five blocks over from the Service
Station. Online banking, and I see the transaction that I made a minute or two
before. I really think you're describing a system where you live that functions
differently than what happens in Canada.

 

[jimmoyer]

Another reason why I like Canada.

Even with a McDonalds, sometimes the debit card transaction is not completed until the next day. And some of our old gas stations systems might put a hold on of a 100 dollars on your account even if you are only pumping 40 dollars and so customers who thought they had enough in their balance are mystified.

And even other franchise restaurants and especially mom and pop stores will take 1 or 2 days to completely post. You will see it listed as pending for a couple days before it finally posts to the account down here in the states.

 

[jimmoyer]

By the way if your system is immediate in its transactions do the banks still allow you to overdraft ?

 

[TenPenny]

My bank account has an automatic line of credit attached to it, so I can go quite far into overdraft. All I have to pay is the interest.

You might want to try that.

 

[Ron in Regina]

By the way if your system is immediate in its transactions do the banks still allow you to overdraft ?

Sometimes it happens (but not on debit transactions unless you've set up your
account specificly to have an overdraft) on automatic withdrawal items like
insurance (auto or life, etc...) that automaticly comes out of your account.

On a Debit transaction, either you have enough cash in your account, or the
display on the Debit machine reads "insufficient funds" and that's it. You leave
empty handed unless you have cash or a credit card, etc....

Outside of businesses and the government, I haven't seen a personal check
written in years either. I'm assuming some must still use them, but I'm not
seeing it.

 

[jimmoyer]

At some point "insufficient funds" does stop the card user cold.

All the ACH (automatic clearing house) debits hit the account and because of the delay all the transactions collide and the balance goes to a negative and then in a delayed response the debit card is deactivated after a certain point.

I'm just wondering why the minute the account even appears to go negative why the banks allow this negative balance?

Any behind the scenes Canadian bank employees up there?

 

[#juan]

Most banks will give you modest overdraft protection that lets you overdraw but you should be aware of how much money is in your account. Your credit card provides the same protection if you pay it off every month. Is this really a problem?

 

[jimmoyer]

Hey #juan !!

Not really a problem for me. I just have seen a whole day of a call center answering non-stop calls of credit union members irate about overdraft fees, all people who constitute being in one of the groups mentioned above: poor, young, soldiers, people without web access to see their transactions. And these were multiple overdraft fees because of transactions that they thought were automaticly taken out before and so when they look at their balance they think everyone has gotten their money already.

Those who have been burned before spend alot of time on the phone asking about their account inquiring if any transaction is still pending. Has Exxon gotten all their money yet? Has Shoney's Restaurant pulled their money yet? Does my balance really represent all matters owed have been paid yet? Even those who are vigilant have a chance of miscalcuating. Just living is too expensive for some.
Like I say the wealthy don't have to worry about paying these fees or having too little in their account to get an overdraft fee.

A lot of people in the states don't know their debit card transactions are not automatic.

As mentioned earlier, those who have enough cushion or like, as you say, use a credit card and pay off the balance are in good shape.