A debit card is not a credit card
I know that seems like a duh statement. But my point is that those new credit card reforms just passed by Congress don’t apply to debit cards. Perhaps you can see where this is going.
The New York Post reports that banks have started jacking up their debit card fees:
Earlier this month, Bank of America announced a $35 fee for most debit-card overdrafts — plus a second $35 fee if it isn’t repaid in five days.
In March, PNC Bank hiked its sustained overdraft fee by 16 percent to $7 a day.
The moves by BofA and PNC follow inflated international fees set by Citigroup and a new, 2 percent foreign fee imposed by Discover Cards.
These upticks not only deftly sidestep the new credit-card law — which does not address debit cards — but come at exactly the time the popularity of debit cards among American consumers surpasses that of credit cards.
The Washington Post has more on “overdraft protection,” which could be the next target for regulation:
Jean Ann Fox, director of financial services for the Consumer Federation of America, said overdraft programs are often not explained when consumers open accounts, and many don’t have opt-out provisions. In a survey of the 16 largest banks, the federation found that all of them charged overdraft fees without the consumer’s consent.
“If I were a bank, I wouldn’t want to tell you I would charge you $70 for letting you overdraw $20,” Fox said.
The Federal Reserve has taken notice and is considering new rules that would crack down on automatic overdraft protection.
Obviously, it’s up to customers to keep track of how much money is in their account, and they won’t have to worry about overdraft fees. But any small mistake, and the banks will make you pay.
It’s hardly surprising. They’re running a business, and one of their major sources of income, credit cards, was just re-regulated. You know they’re going to look for ways to make up for any lost revenue.
Beyond overdraft, I won’t be surprised to see fees cropping up elsewhere — fees specific to debit card usage.
So keep a close eye on your account.
- Jun 29, 2009 11:23 AM — Scott Jagow
- 8 comments
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Comments (8)
June 29, 2009 12:37 PM PT
Debit cards are one of the more dangerous financial devices which have been pushed on the American public. The reason is that they easily lead to overdrafts at the bank which issued them. That’s because most of us won’t write down each transaction and our remaining balance. Banks know this, and make billions from our negligence. Also, sometimes gas stations and hotels block out a large amount on credit or debit cards until the actual amount is determined. With a credit card this is harmless, but with a debit card it can trigger a charge. Furthermore, debit cards do not afford the legal protection from fraud or theft that credit cards do, though sometimes banks will correct wrong charges. What value in debit cards? None, except perhaps self-control, which can be gained over a credit card by writing down all future charges, too.
June 29, 2009 1:56 PM PT
To correct Martin. Debit card do have protection. Regulation E and EFTA do protect debit cards. They key is watching your checking account online. See my tips on my blog.
June 29, 2009 3:04 PM PT
My wife and I determined these differences between credit cards and debit cards some years ago, so this is certainly nothing new. A debit card is the one you want to use at the issuing bank’s ATMs; if you use a credit card at same, even one from the same issuing bank, you’ll be hit with exorbitant “cash advance” fees. Otherwise, a credit card should be one’s preferred choice for transactions - so long as you’re a no-balance-carried type of user (what the credit card business still, I’m sure, refers to as a “deadbeat”).
June 30, 2009 4:47 AM PT
Regarding overdraft fees for those that can’t or won’t keep track of transactions, there is an old saying that applies quite well: “You better be rich if you’re going to be stupid”.
June 30, 2009 6:08 AM PT
People do not have to be victims of debit card overdraft fees or other fees. There are banks now responding to consumers with no overdraft fees or ATM fees like www.probityfinancialservices.com. Seems like a better idea to switch than curse the darkness or wait for the government to rescue someone.
June 30, 2009 2:44 PM PT
I must correct Greg. Your legal protection with a debit card depends on how quickly you report a loss or unauthorized use. That is not the case for a credit card, where the maximum legal loss is $50. Check the Federal Trade Commission, not some guy’s blog!
July 1, 2009 8:13 AM PT
I can imagine the banter at all the banks board meetings…”How do we get these bumbling consumers next?” says one board member. “I know”, says another, “we think like ourselves, then we take away all reason and accountability”.
Sorry for the vague movie reference, but if people aren’t going to be reasonable about what they spend their money on, and then be unaccountable when they don’t have the money to pay for it, then frankly people deserve what they get.
Now, what I don’t agree with is the “hidden notice” buried in the fine print of the seemingly endless “contract changes” the banks seem to send everyone. Whether credit or debit all fees, fines and penalties should be clearly displayed on every statement.
July 13, 2009 11:10 AM PT
Here is the problem with debit card overdraft fees. Years ago when debit cards first came out, they were advertised by banks as a safe and fast way to use your checking account, you were told by the banks that you would not incur fees if there was no money in your account to spend because the card would decline the purchase and not go through. It was touted by financial experts as the smartest card to carry. Then, all of a sudden without letting the consumer know, they decided to start accepting all debit card transactions even if there were no money in your account to cover it. The banks act like they are doing you a favor by letting a $2.50 latte go through and then charging you $37.50 for it. I would much rather have my card declined like it used to be. So, now they are worse then a credit card. I think the reason the banks started doing this is because nobody is writing checks anymore, so they lost there huge revenues and had to find a way to keep them coming in. Also, the banks will wait about a week before popping a letter in the mail to let you know you have incurred one or several overdraft fees in hopes that you will be making a large deposit that they can keep. The sad thing about it is that most people who started carrying debit cards are not rich people who have a several credit cards in ther pocket to fall back on, they are actually hard working people who live paycheck to paycheck to survive and they are the ones getting stuck with all of the gigantic overdraft fees.