Debit cards and overdrafts?

Question

why does this happen? My card has been declined before because of insufficient funds. My bank blasted me with overdrafts a few weeks ago and I was shocked. I heard buying gas can do it but does anyone have a general explaination because the bank isn't budging.

Answer 1

Alot of places actually don't take the money out a couple of days afterwards, so the deduction and transaction doesn't show up for 2-3 business days. I keep an eye on my banking online; for example, I got gas on the 8th and it didn't post to my account as a deduction until August 11th. If this is the case, overdrafts are possible even when you use your debit.

Answer 2

I'm not sure you mean overdraft loans, which is what the other guy is talking about. By the way, they are NOT automatic - I don't have overdraft protection on my accounts.

Two ways I can think of that you can get overdrawn:

1. If you have written checks and they haven't yet cleared, the money is still in your account. And then when you use the debit card, the money isn't there for the checks and you're overdrawn and you get slammed with overdraft fees.

2. Some stores don't have the little machine for you to put in your PIN, so they use your card as a credit card. The money won't come out of your account for a few days when it's done this way, so it looks like it's there and if you take it out, then a few days later, you're overdrawn.

So it really is YOUR fault, not the bank being evil, when this happens. It's up to you to keep track of how much money you really have. If your balance says $102 and you know you wrote $100 in checks or did a $100 credit transaction, then you only have $2 to use.

Your best bet is to keep a minimum balance of, say, $100 in the account for emergency money. That should protect you from overdrafts. Just remember, that's money for emergencies only, not for beer. Not for gas so you can get to a party. Maybe for gas so you can get to work, but then, you could manage on one gallon - you wouldn't need the whole $100 for that.

Answer 3

Easy, the bank signs you up by default for "overdraft" protection and then doesn't decline your card.

From an article on the web:

Most consumers have no idea

The trend concerns Eric Halpern, who co-authored the report. He believes many consumers still have no idea how expensive that Big Mac can be.

"If you ask people on the street what would happen if they tried to make a debit card purchase and their account was empty, most people assume the bank would deny it," he said.

Not any more. Beginning several years ago -- no one really knows when -- banks slowly got into the business of granting short-term, high interest loans to consumers when they attempt to overdraw their accounts. Account holders are automatically enrolled in the programs, which are now standard at nearly all banks.

Why are the programs, which many people have never heard of, so popular? Financial institutions that adopt them can expect a huge spike in overdraft revenue -- a spike of 200 to 400 percent, according to the Center for Responsible Lending.