One Year Later, Debit Cardholders Still Confused About Overdraft Protection Fees

The Federal Reserve’s implementation of new policies last summer has essentially backfired. It was intended to protect debit card users from unexpected overdraft fees and clarify bank policies. Instead, it seems to be helping banks rake in the money by signing account-holders up for overdraft protection plans. Plus, according to a new study by the Center for Responsible Living, the majority of debit-card holders are still confused about what exactly they’re agreeing to.

The New Rules

The Federal Reserve implemented new policies last year to clarify and protect debit-card users against overdraft fees. With these new rules, banks are required to have account-holders agree to their terms before they can go into effect. Basically, an account-holder either decides to opt in or opt out of a protection plan. By opting into a protection plan, you are guaranteed to pay more in fees and maybe even accumulate a little debt. Who knew that was possible with a debit card?

The new policy is relevant to point-of-sale transactions which are approved by the bank when there are insufficient funds in the person’s account to cover the purchase. Before this new rule, the bank would approve the purchase rather than declining it, costing the average account-holder $35 in overdraft fees. According to Time, 80% of debit cardholders said they would rather their card be declined in this instance to avoid fees.

Isn’t the whole point of a debit card to only spend what you have?

Same Old Confusion

A study recently released by the Center for Responsible Lending found that 33% of cardholders opted for overdraft protection fees. The Center also found that 60% of these account-holders did so in order to avoid fees in the event their debit card was declined, meaning they do not want their debit card to be approved when there are insufficient funds in their account. The study also found that for nearly half of the participants who opted in, getting the bank to quit advertising the overdraft protection through email and other methods was a factor in their decision. Despite the questionable behavior of the banks, consumers still seem to be confused about debit card policies. These overdraft protection plans are only bringing in more revenue for banks, which are set to make $38.5 billion this year, up from $36.5 billion last year.

Debit cardholders who opt into this service which allows them to use their debit card when it would otherwise be declined, are probably better suited for a credit card. With so many credit card offers currently featuring low interest rates and no annual fees, a cardholder could save money on fees even with an outstanding balance rather than continually paying overdraft fees on his/her debit card.


Sallie Mae Debit Card Is A Helpful Convenience For Students, If Handled Responsibly

The student loan company Sallie Mae is preparing to release a student debit card in partnership with Mastercard. The new program, which will start this summer, allows students to receive financial aid money and tuition refunds in a special checking account.

Sallie Mae Debit Card Features

Perks of the accounts include:

  1. A free checking account (Here is a Sallie Mae savings account review).
  2. More efficient receipt of money. Students can expect to receive a refund the day it is issued rather than the typical two- to three-day bank lag.
  3. FDIC insurance on deposits.
  4. Surcharge-free withdrawals at 35,000 ATMs nationwide.
  5. No minimum account balance.
  6. The card will not allow the user to overdraw.

Saves students money. The new Sallie Mae debit card will save students money in the long run, especially compared to some of the main competitors in the space. With the new accounts, Sallie Mae is challenging Higher One, its main rival in student payments. Higher One runs a similar program but only has 600 fee-free ATMs. It also charges fees for PIN-based transactions.

Faster and safer for financial aid refunds. Sallie Mae’s move comes in time to comply with new rules taking effect in July requiring universities to refund unused financial aid money in 7 days instead of 14. In addition refunds and other transactions can be handled electronically, which is faster and safer than other types of financial transactions.

Added convenience. The cards will be convenient for students and provide an incentive to borrow from Sallie Mae. But with financial aid money in hand, they will need to be extra careful not to spend it carelessly since, for most students, it will need to be paid back with interest eventually.

A great option for students. Overall, this card is a solid option for students, since they will have added convenience, free checking, many fee-free ATM options, FDIC insurance, no minimum account balance, and the inability to overdraw their accounts.


American Express Getting Into Debit Market

American Express has always been the most mysterious credit card company. Besides the fact that many establishments don’t accept the gold and black card, their presence in the debit market has been non-existent. As the companies first step in the wide world of consumer debit, American Express opened last week a new product called Serve.

The Serve web site is a prepaid electronic wallet, where consumers can access and transfer money through smartphones and computers equipped with Visa Inc., MasterCard Inc., and PayPal Inc. Consumers can go to the website on their phones and download an application for iPhones, iPads and Androids. Blackberry will have access to the technology later this year.

There is no initial cost for opening an account with Serve. Also, deposited funds don’t expire, nor is there a minimum balance required. Refusing to use a debit method attached to checking accounts sets American Express debit cards apart from Bank of America and JPorgan Chase & Co. debit cards which will likely see balance minimums and ATM fees due to the Dodd-Frank Act interchange fee cap. account holders will receive plastic cards linked to their electronic wallets. The Serve logo is on the front of the card, and on the back is a blue box that explains which merchants and consumers that it may be used at. Customers using the card will get one free withdrawal a month from an automated teller machine and be charged $2 for each subsequent withdrawal.

Debit cards are becoming the most common form of payment. According to Bloomberg, global consumer spending and cash transactions on Visa and MasterCard debit cards climbed 20 percent to $3.95 trillion last year. In the U.S., spending on debit cards rose 15 percent in 2010, compared with 6.3 percent for credit cards, according to the Nilson Report, an industry newsletter.

With a recent partnership with the social network FourSquare, American Express has made headway in exploring digital markets. Last year, American Express spent $305 million to buy the Internet-based payment processor Revolution Money, which is the tech foundation for Serve.

There’s no charge for using debit cards or checking accounts to fund a Serve account. Fees for funding accounts with credit cards have been waived for the first six months. After that, AmEx will charge 2.9 percent of the transaction total plus 30 cents, which is competitive with PayPal’s pricing, said Joanna Lambert, an American Express spokeswoman.

Customers can shop online without being required to enter sensitive information, such as a credit-card number and mailing address. They also will be able to send money person- to-person in the U.S. by entering a PIN number and the recipient’s e-mail address. The latter feature will be available worldwide later this year.


Debit Card Transaction Limits and $5 ATM Fees

Banks are hurting right now and are doing everything in their power to continue minting the kind of money their shareholders expect. Due to changes in legislation, some banks are considering limiting the size of debit card transactions. Chase Bank recently announced they are considering capping debit card transactions at $50 or $100 to protest government regulations which place a cap on interchange fees. The cap will limit interchange fees to $0.12 per transaction, which could cost Chase up to $1 billion in profits each year. They claim it will no longer be profitable for them to continue making these transactions at such a low cost.

Chase has already ended their debit rewards card program, which was a very popular program. Ending it, and potentially limiting debit card transactions to $50 or $100 has the potential to destroy Chase’s banking business, as many customers will look to go to banks with a more generous online banking program.

$5 ATM fees. Chase is trying out $5 ATM transaction fees on a limited basis in Illinois, and $4 ATM fees in Texas. They want to monitor how many people are willing to pay these higher fees, and if they are still profitable, they will be rolled into more markets.

Other banking fees. We’re not picking on Chase, I promise. We are just highlighting them because of how frequently they have been in the news within the last week or so. For example, Chase is also testing out additional fees including a $3 per month debit card fee, and $15 per month fee to have a checking account.

The big problem is that banks are like the airline industry – where one goes, others will follow. It’s not good news for consumers as most banks are only considered with making their shareholders happy. In the end, we suffer, while they make more money.

What can consumers do? The best thing you can do is put your money where your mouth is. If you have a problem with the fees banks are charging, let them know. If the banks continue to charge high fees or won’t waive the fees, then walk away. It’s as simple as that. There are plenty of great banks which would love to have your business. Here is a list of free online checking accounts, which don’t have minimum balance requirements and offer ATM access at thousands of locations. Why keep your money with a bank that will charge you too much money just for the pleasure of doing business with them?


New Unemployment Debit Card Costing Consumers

We are a part of a debit nation. Cash and checks are becoming more and more obsolete. Now days, we turn to debit for everything from daily purchases to disability benefits, and now unemployment payments.

Over 30 states have made commitments to begin issuing debit cards for those on unemployment. Deals have been made with Bank of America Corp., JP Morgan Chase and US Bancorp.

Wyoming is one of the latest states to hop on the debit bandwagon. High unemployment states such as California and Florida are looking to implement the system by the end of this year. While it may seem like a good idea, most consumers seem to prefer the snail mail method, as transferring payment via debit card has been costing consumers more than they’d like.

Programs vary by state, but consumers are generally charged $1.50 ATM withdrawals, and 50 cents for bank calls.

In some states those receiving unemployment benefits are required to use the prepaid debit cards, while other states provide other payment options. Some banks charge overdraft fees of $20 instead of preventing charges exceeding the balance of the prepaid debit card. In Pennsylvania they charge for lost debit cards, contacting the call center, checking card balances, making withdrawals and balance inquires.

While many consumers believe that the fees are illegal. The U.S. Department of Labor allows the fees as long as the states allow consumers to get the money for free. Consumers can get the money for free if the use the debit cards for all purchases or withdrawal all the money one time, according to Suzy Bohnert, a Department of Labor spokeswoman.

Joan Evans the Workforce Service director in Wyoming encourages consumers to use the debit cards, as they are a better way to serve clients, as they don’t have to wait in line to cash their checks. “The individual decides how to manage his drawdowns using the debit card,” she said.

“If you use your card the right way, you shouldn’t have to pay fees at all,” a representative at said. “The goal is to make it easier for consumers to access money and give them greater ease at purchasing in an Internet world.”

But the consumer consensus is in – saving 15 minutes of their time waiting in line is not worth the penalties.


Girl Scouts Now Accept Debit Cards

It’s that time of year— that time when those Girl Scouts dress up in their matching patch-adorned green vests, and go door-to-door peddling Thin Mints and Tagalongs to any one with a dollar. I know they’re little girls, but they turn from sweet to sour in a few minutes when you explain that you’ve got to pay rent, or you spend your last change on parking, or whatever it may be, they change from Priscella to Cruella.

Because who has the dollar has the power, these Buttercups have learned at an early age the benefits of having money. In an attempt to teach the Ohio chapter of the Girl Scouts financial literacy, their branch has begun taking credit cards at various booth locations in Central Ohio. This means that any one 18 and up has no excuse to not succumb to the Girl Scout cookie peer pressure.

Girl Scouts have teamed up with AppNinja’s Swipe Credit Card Terminal for the iPhone in order to accept credit cards at various booth locations in central Ohio during March. Since the beginning of March, credit cards have accounted for over $1,500 in sales.

That’s a big step for both the Girl Scouts and for my sweet tooth. “Our Cookie Program is our largest business literacy program for girls,” said Tammy Wharton, CEO of the Girl Scouts of Ohio’s Heartland Council. “They also are learning to use new technology to market cookies. Customers can use a new smart phone app — the cookie locator app — to find cookie booth sales.”

AppNinjas is the developer of Swipe Credit Card Terminal for iPhone, which changes a merchant’s iPod touch, iPad or iPhone into a credit terminal that is safe and secure. “Swipe Credit Card Terminal for iPhone will teach them even more new technological skills they may likely use in the future,” explained Wharton.

Girl Scouts pride themselves on giving girls business skills that they will use for the rest of their lives. That’s why developing financial literacy is of the utmost importance. The program is designed for girls who are destined to take control of their finances in a digital future through a sustainable income, budgeting, managing credit, investing and being a loyal consumer.