A study released last month by the Center for Responsible Lending (CRL) showed that debit card purchases and ATM withdrawals account for nearly half of all overdraft fees.
“It happens more with debit cards than with checks,” said Partners Trust Bank Branch Vice President Terri Slater. According her, misconception accounts for a big portion of the problem. “Many customers think the charges will not be approved if they do not have enough funds,” Slater said. She explained that many people, especially young people, do not realize they must account for checks that are on hold and look at both their available balance and their actual balance. “Some merchants don’t send their transactions through right away,” Slater said.
At Partners Trust, Slater said she has noticed a trend among young account holders to use their debit cards for purchases of very small amounts. “They spend two dollars here and two dollars there, by the end of the day they could have seven or eight $30 overdraft charges,” Slater said.
According to Slater, at Partners Trust, accounts in good standing may have automatic overdraft protection. The protection covers checks up to $500, even if there is not enough money in the account. “It was meant to be used and taken care of,” Slater said. However, if it is not taken care of, even more overdraft fees may accumulate. After seven days of inactivity on an overdrawn account, an inactivity fee of $5 a day is charged for every day the account remains at a negative balance. If there is still no action taken, the situation may become so bad that the customer will not be able to get another checking account in the future, and their credit will be affected as a result.
According to the CRL study, low-income households had the most problems with the banks overdraft policies and the most trouble overcoming the debt they experienced as a result.
Slater said there are ways to avoid the overdraft fees. Most importantly, customers should keep track of their transactions. Mini transaction registers have been made to use specifically with debit cards, and Slater said, online banking is the perfect way to keep track of your balance. Some banks, although Partners Trust is not one of them, allow customers to link savings and checking accounts, so that funds are automatically deducted from the savings if the checking account gets too low. Although Partners Trust does not offer this service, Slater said customers can always transfer funds between accounts if the funds get low. In addition, most banks now offer overdraft protection. “Overdraft protection, which is a line of credit, is a good thing to have on your account,” Slater said.
According to Slater, all checking account policies and features are fully discussed with new customers. “The bottom line is, don’t use your card if you don’t have the money in your account,” Slater said.