Debit Card Danger
Source: Center for Responsible Lending
From press release:

The report, “Debit Card Danger,” analyzed the checking accounts of more than 5,000 customers of the nation’s 15 largest banks and found that debit card purchases and ATM withdrawals trigger 46 percent of high-cost overdraft loans. Written checks, on the other hand, are responsible for just over one quarter.

Making an in-store debit card purchase is by far the most expensive way to overdraft, costing $2.17 for every dollar borrowed. By comparison, check-triggered overdraft loans cost $0.86 per dollar borrowed. These findings refute the contention commonly made by banks and credit unions, many of which also have fee-based overdraft programs, that they are protecting consumers by sparing them the expense of bounced checks.

Banks could prevent debit card overdrafts at checkouts and ATMs by denying the transaction or warning the customer, though doing so would eliminate the opportunity to charge an average $34 fee. Yet a survey of account holders conducted in conjunction with the analysis of checking account transactions showed that people want the chance to avoid spending into the red. Some 61 percent of the 2,400 surveyed preferred that their debit card purchase be denied at the checkout if it would otherwise overdraw their account and incur a fee. Nearly all responded that they would cancel their ATM withdrawal to avoid a fee.

+ Full Report (PDF; 825 KB)

This entry was posted on Friday, January 26th, 2007 at 9:36 am and is filed under Business and economics, Consumer issues. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.