Debit Card Danger

February 1, 2007

Reported by: Britney Glaser

If you have a bank account, you probably have a debit card-but how cautious are you when using this card?  Debit cards make it easy to make purchases both small and large practically anywhere, which can add up to multiple transactions in a day.  But, with record high overdraft fees on customers, a small-dollar debit card transaction can turn into an expensive purchase.

Spending money has never been easier or faster, with the simple swipe of a card.  The Center for Responsible Lending says that 38% of account overdrafts are a result of debit cards.  Carly Leonards, Commercial Lender VP with Jeff Davis Bank says, "They're just so easy to use that people take them out like a credit card and swipe them and forget to record the transaction."

Lake Charles resident Michael Cox says he does not record his debit card transactions, "Absolutely not, no one does."

With an average fee for overdrafting at about $27, small transactions can add up quickly.  Leonards says, "You'll have to pay a NSF fee for every item that causes you to be in the overdraft."

Now, if you're ready to get a firm grip on your bank account, the first step is to have a budget.  If using a debit card or check is not for you, you might be interested in the "cash envelope system."

John Hixson with Financial Management Professionals in Lake Charles says, "Let's say you're paid twice a month, at the beginning of that period you allot a certain amount of cash for each item: entertainment, groceries, etc., and when you spend that envelope, no more groceries, or no more entertainment."

The most important advice before swiping as Cox says, "Everyday...on anything," is to know what's in your account and live within your means.

Most banks do actually have overdraft protection for accounts, but this does not mean that you are protected from incurring these hefty fees.  You are granted credit to write checks or use your card for more than your actual account balance.