| In 2008, the banking industry made $29 billion in fee | | | | 8%. The overdraft protection programs that seemed |
| income, with the median overdraft fee being $27. The | | | | like such a good idea for check writers may not be |
| Obama administration has even proposed a new | | | | quite so enticing for a frequent debit card user. While |
| government agency that would have the power to | | | | some people might like to save the embarrassment of |
| regulate such fees. What happened to make | | | | being declined, others would rather skip the fee and be |
| overdraft checking such a big problem, and how can | | | | told no on their transaction. |
| you stop your bank from taking excess money out of | | | | Debit card users overdraft their accounts more often |
| your pocket? | | | | than those who write checks for several reasons. |
| The history of overdraft protection | | | | One is that few people keep a check register |
| For the majority of the twentieth century, the primary | | | | anymore since online banking allows for all transactions |
| payment options were cash or check. You knew how | | | | to be viewable over the internet. A second reason is |
| much money was in your account by keeping a | | | | because payments are now happening in real time, |
| handwritten check register. If you wrote a "hot check" | | | | while checks take several days to clear. |
| for more money than you had in your checking | | | | Banks, of course, are taking advantage of this |
| account, the check would bounce. The bank would | | | | increase in overdrafts. To maximize fees, banks |
| reject it and charge you a fee. The bank would then | | | | automatically enroll all of their checking account |
| return the check to the merchant, who would charge | | | | customers into overdraft protection programs. |
| you another fee. | | | | How this affects you |
| To save their customers from embarrassment and | | | | If you frequently write checks, overdraft protection |
| multiple fees, banks began instating overdraft | | | | may be a good solution to paying multiple bounced |
| protection programs. Under these programs, the bank | | | | check fees. If you are a heavy debit card user that |
| would charge you a single fee and cover the funds | | | | frequently overdraws your account, however, you |
| that you didn't have, up to a certain amount. Checks no | | | | could visit or call your bank and ask to be removed |
| longer bounced, customers paid one fee instead of | | | | from their overdraft program. Now when you make a |
| two, and the bank made money. | | | | purchase for which you do not have enough money, |
| The rise of the debit card | | | | the merchant will simply decline your card. Although |
| In 2006, plastic payments (debit and credit cards) | | | | you won't be able to carry through with your purchase, |
| accounted for half of all retail payments for the first | | | | you will not be charged an overdraft fee. Going |
| time. By 2008, debit cards accounted for 37% of all in | | | | without coffee for a day could be better than paying |
| store transactions, while checks only accounted for | | | | $40 for a latte. |