Make the right choice when you decide how your debit card will work!


In a down economy, such as the one we are living in right now, most Americans are trying to figure out where we can pinch some pennies. Many of us have lost large fractions of our life savings or even lost our jobs or homes. Money is tight all over the place and even though the government says that many of their bailout plans are starting to show signs of success, most of us do not see that success reflected in your checking accounts. However, we are all very lucky that we have relationships with our banks and that they are willing to bail us out in a time of need, right?? Well, not exactly. Many of us have found out the hard way that our banks are in business to make a profit. The banks depend heavily on fee income. Whether it is fees off of interest rates from loans and credit cards, fees from late payments on those same loans or just plain old service fees in all of the accounts they offer, the bank depends on this money to operate at a profit.

The one fee that seems to have gotten the best of almost every banking customer at one time or another is the overdraft fee. Everybody has their excuse about why they overdrew their account. Anything from a payee taking money electronically from the customer’s account earlier than expected to the customer’s employer writing him a bad paycheck, which could lead to a whole series of bounced checks. These are just two of hundreds of reasons why someone may overdraw his account. However, in many cases it is not the customer’s fault that his account was overdrawn, and $35 per transaction seems a bit steep as a penalty. Some customer’s of the bank were paying as much as $3000 a year in overdraft fees. There was just nothing they could do about, money is tight.

Luckily, the government has stepped in to put an end to these ridiculous overdraft fees (or at least take a step in the right direction). It is still possible for a customer to overdraw his account, but the way his debit card works has changed. The option that the customer has now is to choose if he wants his debit card to let him overdraw his account or not. This means that if he chooses he does not want his card to overdraw his account if he were to make a purchase that sends him negative, his card will be rejected at the point of sale.

This option is not for everybody. Some people need to be able to overdraw their account from time to time if they have an emergency, need to buy medication, or need to feed their child, ect. These customers have until the end of that business day to make a deposit to cover the amount that they have gone negative or they will be charged a fee. Many customers know that it works this way and choose to leave their card working the way it used to, where they can go negative.

Other customers like to have their card be rejected at the point of sale if they were to overdraw their account. These are usually the people that just don’t really pay attention to their account. They may not have known that a check went through already or maybe they thought a deposit had cleared which was still not available.

It can be argued both ways, but you need to talk to a banker about what the best option is for you. It is important to be smart about this decision about the new overdraft laws because it can save you a lot of money if you make one mistake. However, be careful when making your decision. A few banks are having their employees push customers in the direction of letting their debit card transaction make their account negative or else they are making the decision seem more confusing than it has to be in order to generate more decisions that would lead to greater profits for the bank.

Whatever your choice, give it some thought, those fees really start to add up!

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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