Sunday, April 25, 2010

Your Debit Card

The bank sent a notice this week of policy changes. I skimmed it, expecting to throw it out. You know how most of those notices are -- they are "privacy notices" which tell a gazillion places they can send your private information as they protect your privacy. [Can anyone say "1984"???] The notice wasn't about privacy, though. It was about fees and overdraft protection. I read it more thoroughly. Still didn't understand it. Gary looked it over and we discussed it. We still weren't sure what it said.

Saturday I took the paper to the bank and asked them to explain it to a dummy. They assured me I was no dummy. As they began to explain about new government policies regarding overdraft protection on debit cards, the lightbulb began to glow dimly. I told the tellers that the reasonable procedure would be for a debit card to be rejected if there were insufficient funds to cover a particular expense. The girls told me to "X this box here to opt-out, and sign the document, if that's what you want."

I asked what current policy is. They told me current policy is for the nationwide system to accept any attempt to use a debit card, even if there are insufficient funds; the bank will provide overdraft protection (in essence, shuffling money in your accounts or even possibly giving you a tiny insta-loan, with all associated fees). I looked at them skeptically and then asked, "What was the policy a couple of months ago?" They told me that, until recent government regulations demanded banks change their policies, a debit card would indeed have been rejected if there wasn't enough money in the account to cover a charge. In other words, if your debit-card "check" isn't going to clear, then it's not okay; you just cannot use the card. But ... the government is here to help us. And the policy is now that all charges go through unless you opt out.

So my brain is spinning through possible scenarios. How is this "help"? By what stretch of the imagination did somebody in Washington decide that this policy change would help ANYBODY?

If somebody steals my debit card, he can clean out my checking account. According to new helpful policies, he can clean out my savings account too.

What if I make a math error in my checkbook? Or what if there's a glitch in communication between my husband and me, in different places, both trying to use the same money at the same time? Do we want the computer-system to allow us both to spend the same dollars in different places at the same time, so that we have to pay fees to the bank for covering our butts when we bounced a check? Or do we just want the computer-system to say "NO, you can't spend the money; it ain't there"?

Will this policy change encourage people to spend money they don't have? Will this policy end up costing consumers a lot of money in bank fees?

Maybe you can help me. WHO might this policy help? I figure that maybe the people who are stuck in Europe and Asia because of the volcano, who are running out of money, who don't have any way to transfer funds or restock their checking accounts, maybe they would be glad to have access to extra cash. Maybe. However, running up debt on a credit card would probably be more frugal than incurring overdraft fees on a debit card.

So ... short of unforeseen once-in-a-lifetime disasters that cause a person to be stranded without access to credit ... who could benefit from the government's recent help with regard to debit cards and overdraft protection?


  1. You have to be careful with this, too, because when they change policy again, they could automatically opt you back in. I opted out of overdraft protection before I went to college, but my bank changed policy on me and opted me back in all on their own. I had money in my savings account, but not checking (I'd forgotten to transfer funds), and I got charged a HUGE amount in fees and overdraft charges because of it. When all I would have had to do was not buy whatever it was at the time (I think it was food over summer), go home, shuffle a few dollars around, and then go back and buy the thing.

    Instead, I think it ended up costing me over $100. Because they charged me for every day that I didn't pay the fees, and they snail mailed me the notice.

    I actually think I managed to get them to drop some of the fees because of that (if I remember correctly, by the time I received the notice they wanted me to chalk up over $300 in fines). Still- it was expensive. And it really hurt me financially over a summer when I was already low on funds.

    Was it my fault that I didn't notice my checking had run dry? Definitely. But I had opted out of overdraft protection. I wanted them to just tell me, "Hey, sorry, you can't buy this!" And they put it back on when they changed something in their policy statements, which I didn't bother to read thoroughly, because I thought it didn't apply to me - I'd already opted out!

    It still makes me mad to think about it to this day.

  2. I guess the ones that benefit are the retailers who make the sale. They get the money that really isn't there to begin with and the consumer figures out where to find the money at some point later on.

  3. We will be back to people buying things they can't afford...then they won't be able to pay the fees, and the banks won't be able to pay the fees or replenish the money lost, and the government with have to bail out the banks...again.

    This is nuts!

  4. Nathan, I'd still be ticked over that too!

    Cheryl, yup, I guess the retailers always want people to BUY NOW and not think about it for a day or be delayed, in case the customer changes his mind and doesn't buy the item after all.

    Laura, Gary said what you said. He said we played this game already with the mortgages. The banks were ordered to do something by the federal govt; the banks protested that giving those loans would harm the borrowers and harm the banks. The govt insisted. The home-owners overextended themselves and got into big trouble. The banks began to fail. And the government said, "Shame on those big bad banks. Now we have to rescue them."

    So I guess we won't be surprised if this turns out to be another set-up for the banks -- forcing them to engage in harmful business practices. The bank customers will complain when they get whopped by fees they didn't anticipate. The banks will struggle even more to stay afloat. Then in 5 years the govt will have their excuse to swoop in and take them over.

  5. Next on the horizon on the financial crisis front: a federal bailout of state and local governments. Can you say bribe? (We'll bail you out in exchange for not challenging our supremacy.)