Even Small Debit Cards and ATM Withdrawals Can Lead to Big Fees

Since when does a cup of coffee cost $40? Since banks started using debit cards to make profits off their customers.

In the past few years, consumers have increasingly turned to debit cards and cash rather than credit. It makes sense - most Americans are carrying some sort of debt burden and we don't want to keep adding to it. We're tired of shelling out our hard-earned income to creditors; we want to take back control of our money. But banks aren't about to let us find financial freedom without a fight. They've begun capitalizing on this new trend with a little thing they call overdraft protection.

Let's say you use your debit card to buy a $4 drink at your favorite coffee shop. Now let's say you had put your paycheck in the bank a few days ago and, unbeknownst to you, it hasn't officially cleared yet. Your debit purchase will go through without any warning and you won't know that anything has happened. That is, until you look at your next bank statement and see that you paid $44 total for that caffeine fix, thanks to your bank's overdraft protection program.

Banks say they're doing you a favor by covering your purchases when you overdraw so you won't be embarrassed when your card is declined. But in fact, they're just making excuses to slap you with yet another fee. And it's not just debit users that at risk. Most banks now allow you to overdraw at the ATM or on scheduled automatic payments - essentially, any time you use your money from your account. At $27 billion annually, profits from overdraft fees have officially surpassed profits from credit card fees.

The worst part is that the hardest hit are folks with the lowest income or biggest financial troubles, meaning big banks are earning most of their money from those who can least afford to give it up. In the future, lawmakers hope to curb this unfair practice by requiring banks to warn you before you make a purchase that would lead to a fee. But until then, you're going to have to take action to protect yourself.

The best way to avoid fees is to stay aware of the amount in your account. But if you're consistently overdrawing, the problem isn't just a lack of awareness - it's a lack of funds. One of the easiest ways to free up more spending money for those bills is by decreasing what you already owe - your debts. In many cases, filing for bankruptcy is the most logical - and affordable - way to do it. When you sign up for a free personal debt analysis, one of our Chicago attorneys will help you find a bankruptcy plan that will put you in control of your money - not your bank.

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