Chicago Bankruptcy Attorneys Warn Consumers About Overdraft Protection Fees
You can't believe everything you read - especially when it comes to your bank, say Chicago bankruptcy attorneys.
Many banks are sending out letters urging customers to sign up for overdraft protection, a program that allows your bank to authorize a debit purchase - even if there's not enough money in your account to cover it. Some letters are going so far as to threaten customers, warning that their debit cards won't continue to work unless they contact their bank immediately, according to the New York Times.
With bold font and terms like "emergency" and "contact us immediately," these messages can be unnerving - not to mention confusing - for folks who frequently rely on a debit card to make purchases. But their purpose is actually very simple - they're advertisements. And you shouldn't fall for them. Overdraft protection isn't about saving you the hassle of overdrawing; banks want you to sign up so they can charge a fee each time they authorize money because you don't have enough to cover a purchase. Here's the real story on overdraft protection.
Until now, overdraft protection was automatic. You probably had it and didn't even know about it - that is, unless you've overdrawn on your account. That's when the so-called "protection" kicks in. Let's say you used your debt card last time you spent $10 on lunch. Let's also say that unbeknownst to you, your paycheck hasn't cleared yet - so there's $9 left in your account. Instead of declining your card - at which point you could pull out cash or a credit card - the purchase goes through and you don't realize anything happened...until you get a $40 (or more) fee on your next statement. That's a pretty expensive lunch!
This summer, consumer protection laws go into effect, forcing banks to get a customer's permission before enrolling them in overdraft protection. It might not seem like a big deal to you and me, but it is to banks. Why? Because last year they made $20 billion from overdraft protection fees. They don't want to stop making money off of us - and they're doing whatever they can to convince us it's in our best interest to keep paying them.
Don't listen. Is it really worth it to lose $50 just so you don't have to come up with another form of payment? And if you're worried that you don't have enough in the bank to get by without overdrawing, it sounds like you're overwhelmed by debt. Bankruptcy can be a permanent way to lower - or completely eliminate - debt. Find out if bankruptcy is your path to financial freedom with a free personal debt analysis courtesy of a Chicago bankruptcy attorney.