Consumer Payment Card News

Debit Gotcha

As more consumers pull out debit cards to pay for stuff, they may not realize that a screw-up on a debit card can be more costly than on a credit card. For example, if you are maxed out on your credit card and then make ten $10 over-limit transactions you’ll be hit with an average one-time $35 fee for going above the credit line. With a debit card you can be hit with a $35 fee each over-limit transaction. Debit cards are linked to a checking or savings account and therefore fall under different rules than credit cards. Debit cards are just like checks, subject to hefty fees for bouncing a check or exceeding your available balance. A survey released in July from Moebs Services reported the average overdraft fee rose 10% this year to $27.50 and compared to $23.25 five years ago. GA-based bank consultancy Bretton Woods found that the average U.S. household now has more than 12 overdraft transactions per year and pays $368 annually in fees. A 2008 FDIC survey discovered that customers living in low-income areas carry the brunt of most of the fees, and that 46% of young adults are charged for unauthorized overdrafts in high numbers. The FDIC report also shows that over half of the large banks surveyed process overdrafts from largest to smallest, which can artificially increase the number of overdrafts fees incurred by consumers. Additionally, the FDIC found that a majority of banks reported automatically enrolling customers into overdraft systems that impose a fee. However, survey released last week found that 17% of all U.S. bank customers did not pay an overdraft fee in the previous twelve months, compared to 19% in the prior year. The August survey for the American Bankers Association by Ipsos-Reid found that of the consumers who did pay overdraft fees in the past 12 months: 36% paid one; 10% paid two; 15% paid three; 13% paid four; 6% paid five; 11% paid between six and ten; and 5% paid more than ten.

       2004: $23.25
       2005: $23.89
       2006: $24.44
       2007: $25.07
       2008: $25.64
       2009: $27.50
       Source: Moebs

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