Most debit card fees come by way of “overdraft protection,” in which banks allow customers to spend more than what’s in their accounts—and then customers are smacked with fees of around $35 each time they do so. Here’s a real shocker: Very few people actually want that sort of protection.
News broke recently that many banks are changing how often they hit customers with debit card fees. One of the changes involves actually asking whether customers want overdraft protection in the first place. (Many banks automatically include it, and it’s up to the customer to specifically request that the “service” be removed.)
Now, by way of a NY Times editorial blasting debit card overdraft fees, comes a survey revealing that 8 in 10 people said that they’d prefer to go without overdraft protection. From the Times:
In general, cardholders are not notified that they have been charged $34 each for purchases as innocuous as a cup of coffee, a bottle of aspirin or a magazine until it is too late.
When asked in a national telephone survey, about 8 in 10 people said that they would rather the bank deny the transaction than charge them a fee. But banks typically do not inform people at the point of purchase that they are about to be overdrawn.
You can understand why the banks try to disguise these fees as “protection.” Banks make a killing off of them: $24 billion in 2008, a 35 percent increase from two years earlier.
Banks may even make more money from such fees this year, when, as the Washington Post reports, more and more people are growing more and more likely to use debit cards instead of credit cards.
Why the preference for debit cards? Because overusing a credit card can land you deep in debt. Overusing a debit card will “only” result in scads of fees, and instances in which you basically pay $37 for a $2 coffee. Guess this is the lesser of two evils.