Banks Are Making Some Debit Cards More Expensive Than Credit

Imagine opening up your bank statement and finding that the $5 lunch you bought with your debit card last week actually cost you $45. Sound outrageous? It is - but it's happening to bank customers across the county.

As more consumers choose to forgo credit and its accompanying interest and fees, banks are finding sneaky new ways to make money - in this case, through overdraft protection. Don't be fooled by its name. Though it sounds helpful, overdraft programs do nothing to protect consumers. All they protect is banks' bottom lines.

Here's how the program works. Let's say you're buying a $5 sandwich. You smartly figure that you'd rather not pay interest on such a small purchase, so you use debit - what should be the equivalent of cash, since it takes the money directly out of your account. But now let's say you don't realize the check you deposited a few days ago hasn't cleared yet - and you overdraw by 50 cents. Rather than decline your card, your bank let's you go ahead and make the purchase. You don't know anything is amiss until you get your monthly bank statement and see lunch that day cost almost 50 bucks in overdraft fees.

Overdraft protection is essentially a short-term loan. Your bank covers the amount beyond what's in your account - and then they charge you interest in the form of crazy-high fees. Your bank will tell you they're protecting you from not getting the item you need or from embarrassing yourself when your debit card is declined. But that's not the truth. The truth is, they automatically enrolled you in the program - likely without telling you - so they have an excuse to make money.

It's not only debit cards that are subject to overdraft fees. Many banks will also charge if you overdraw at the ATM or don't have enough in your account when an automatically scheduled payment is debited. If you don't check your account frequently you're not only at risk for overdraft fees, but you could already be paying them without realizing it. Unfortunately, your bank is not in business to look out for you - they're in business to make money. Now, that shouldn't mean you have to surrender control of your finances. It just means you're going to have to be a bit more vigilant.

Keep track of how much money you have. Most banks offer free online banking - if yours does, use it to check up on your accounts. If you're worried that you'll overdraw, go into your bank rather than using the ATM or a debit card. And if all else fails and you keep getting slapped with fees, don't give up - get help.

The No. 1 reason folks struggle with bills is debt. If you can free up all that money going to credit card debt and other obligations each month, paying the bills will get a lot simpler. Bankruptcy can be the most affordable way to do it.

To find the bankruptcy plan that's perfect for you, sign up for a free personal debt analysis with one of our Atlanta bankruptcy attorneys. You've given enough of your hard-earned dollars to banks - we can help you start keeping what you deserve.

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