I have loved my debit card for many years. Having it allows me to shop and travel without carrying much cash. But the joys of swiping a debit card can have repercussions if you are not informed and ready to take control of your bank account.<br />
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First, the debit card using individual must always enter the expenditure and any fees charged into their paper or electronic check register to keep current on the available funds. Do not rely solely on your bank statement to provide this information. It is important that you track purchases and fees. The convenience of debit cards comes with the responsibility of staying aware of your accurate bank balance.<br />
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Secondly, if using a debit card when the account has insufficient funds you will be charged a fee. When an account goes into a negative balance the bank may cover the overdraft, but can charge a fee when the next deposit is made. This service is called "courtesy overdraft protection." Fees average $34 per overdraft and can quickly increase an account holder's level of debt if this happens repeatedly. The bank may allow you to make several transactions when you have insufficient funds, but they can charge you a penalty for each. Find out your bank's policy.<br />
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There are some other options when it comes to overdraft protection and they come with different costs. These options include linking to a savings account or linking to overdraft lines of credit. Overdraft lines of credit can get expensive because of interest charges and fees and can end up increasing your overall debt levels. So try to avoid using these plans as short-term loans.<br />
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One way to avoid getting into a continuous debt cycle is to make sure the balance of the line of credit does not show up as a part of your bank account balance. Linking your checking account to a savings account may be less expensive but fees may also be charged. Paying fees means less money for other things, so I try to avoid fees whenever possible.<br />
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Fees for using ATM's can also add up quickly. Find out which ATM's you can access without a fee. <br />
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No Fee Debit Card Use<br />
- Track your balance.<br />
- Avoid costly courtesy overdraft protection charges.<br />
- Linking to savings account can be less expensive than an overdraft line of credit or<br />
courtesy overdraft. Keep in mind, fees for this service can add up!<br />
- Find out about all banks fees. Remember, fees can increase.<br />
- Use only ATM's where you will not be charged a fee. Plan ahead!<br />
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Sources:<br />
-Federal Reserve, "Protecting Yourself from Overdraft and Bounced- Check Fees."<br />
-Congressional Testimony of Eric Halperin, Center for Responsible Lending.
