Prepaid Debit Card Reviews, Complaints, Etc

Tag: overdraft fees

  • Get Financially Fit by Avoiding Rising Overdraft and ATM Fees

    Get Financially Fit by Avoiding Rising Overdraft and ATM Fees

    Have you ever made a $20 purchase with a debit card and ended up shelling out $50 because you forgot you didn’t have enough money in your account? If you did have to fork over an additional $30 to pay that dreaded overdraft fee, you’re actually a little bit fortunate. That’s because a new study by Bankrate.com pegs the average overdraft fee at $32.74, a new high as well as the 16th consecutive year the study has found an uptick in the penalty consumers must pay for sending their account into the red. Which all points to the need to avoid overdraft fees in order to remain financially fit.

    As part of its 17th annual Bankrate Checking Survey, the personal finance website surveyed the 10 largest banks and thrifts in 25 of the country’s largest markets. The survey found that overdraft fees also have geographic distinctions. At $34.80, Philadelphia had the highest, while San Francisco had an average fee of $26.74.

    Over the summer the Consumer Financial Protection Bureau (CFPB) put overdraft fees in its cross hairs, noting that the median debit card purchase is just $24. When an overdraft fee of $32.74 kicks in – which consumers typically pay within a few days – the CFPB noted that it amounted to a short-term loan with an interest rate of over 17,000 percent.

    There are ways to avoid overdraft fees. One is to simply decline overdraft protection, which has the effect of disallowing any purchase you don’t have the funds to cover. Another is to sign-up for email or text alerts that make you aware when your account has dwindling funds. Still another is to use prepaid debit cards, which only allow you to spend the amount of money you’ve pre-loaded into the account. While some prepaid debit cards have overdraft protection, it’s wise to decline it.

    The Bankrate survey had more grim news for the users of debit cards. The trend line for ATM fees is similar to that of overdraft charges, with the average cost of using an out-of-network machine reaching a new high of $4.35 per transaction. This charge includes both the fee consumers pay to the owner of the ATM as well as the amount they must pay their own bank for going out of network. As is the case with overdraft fees, location matters. In Phoenix, the average ATM fees were $4.96, while Cincinnati was the lowest at $3.75.

    There was some positive news in the study. This year marked the end of a steady decline in the number of free checking accounts available to consumers. In 2009, 76 percent of non-interest checking accounts did not charge a fee, a number that steadily declined to 39 percent by 2013. This year, though, the percentage seemed to stabilize at 38 percent.

     

     

  • Reports Show Bank Customers Need More Protection From Debit Card Overdraft Fees

    Reports Show Bank Customers Need More Protection From Debit Card Overdraft Fees

    A report released this week by the Consumer Financial Protection Bureau shows bank customers need more protection from debit card overdraft fees.  The report focuses on overdraft fees banks charge customers when they overdraw their checking account with a debit or ATM card.

    Before mid-2010, when customers didn’t have enough money on their checking account to cover transactions, most banks would allow the purchase to go through and charge an overdraft fee.  This would result in multiple overdraft fees for the customer.  In 2009, the Federal Reserve adopted a new rule that prohibited banks from charging overdraft fees unless customers opted into an overdraft program in advance.

    The CFPB study found that not only did a large number of customers sign up for overdraft protection, but they continued to rack up fees.  The study also found customers who had been charged overdraft fees before the opt-in rule were more likely to opt in than those who had not been hit with overdrafts.  It also showed the more overdraft charges they had incurred before the rule, the more likely they were to opt in.  Customers who incurred at least one overdraft or bounced check fee in 2011 paid an average of $225 in overdraft fees that year.

    Banks say overdraft protection is a service some customers want and are willing to pay for.  Consumer groups say banks are luring customers into the program with confusing disclosures and marketing pitches.  “So-called ‘overdraft protection’ programs are really just a way for banks to bilk their most vulnerable customers with costly fees,” Consumers Union says in a press release.

    “We need to determine whether banks and credit unions are causing the kind of consumer harm that the federal consumer protections laws are designed to prevent,” said CFPB Director Richard Cordray.

    Consumers Union says the report “underscores the need for new reforms to protect customers from unfair checking account overdraft programs.”  It urges the bureau and other federal regulators to simplify disclosures of overdraft policies, require that overdraft fees be reasonable and proportional to the financial institution’s cost, limit the number of overdraft fees that can be charged per day and year and prohibit banks from processing daily transactions in a way that maximizes fees.  A bill sponsored by Rep. Carolyn Maloney, D-N.Y, would do many of those things including limiting fees o one per month and six per year.

    For more information on the CFPB Study of Overdraft Programs, visit:  http://files.consumerfinance.gov/f/201306_cfpb_whitepaper_overdraft-practices.pdf

    For more information on this article, visit:  http://blog.sfgate.com/pender/2013/06/11/bank-customers-still-racking-up-debit-card-overdraft-fees-report-says/

Prepaid Debit Card Reviews, Complaints, Etc