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The Daily Wildcat

The Daily Wildcat

 

Debit safer than credit? Maybe not …

“”I’m getting a credit card, Mom! You know, for emergencies like doctor’s appointments, medication, food … a new Ipod,”” I said in my freshman year.

The plan left my mind in her warning that followed: “”You’ll ruin your credit, you’ll be tempted to go on shopping sprees, you’ll get in a bunch of debt with these crazy interest rates and with the way the economy is you shouldn’t spend outside of your means, extravagance now equals poverty later.””

Alarmed by my mother’s horror stories of future financial death, I decided to only spend the money I already had in my bank account and get a debit card. I thought this was safer than carrying cash and less risky than buying with a credit card. But when it comes to spending the money in your checking account, your debit card may be giving you little more than a false sense of security.                        

With a struggling economy and fewer people applying for and using credit cards, it seems as though banks have found a new way to make money off their customers.  What’s their new method of attack?         

Overdraft fees. “”Banks will let you overspend on your debit card in a way that is much, much more expensive than almost any credit card,”” said Eric Halperin, director of the Washington office of the Center for Responsible Learning, in a recent New York Times article. As a matter of fact, the Federal Deposit Insurance Corporation conducted a study finding that banks are expected to make $27 billion dollars off of overdraft protection fees this year alone.                           

Most likely, at some point in your college career you’ve fallen victim to the frightening bank overdraft. Those negative red numbers denoting your failure in financial responsibility look pretty daunting on bank statements. Even more frightening, perhaps, are the accompanying overdraft fees that most major banks add on once you’ve gone over. Any logical human being would think that when you use your debit card to buy everyday necessities like gas, groceries, coffee, etc., if you have enough money in your bank account to cover the charges the little digital letters “”APPROVED”” will flash once you swipe your card. You would think that logically, if you don’t have enough money in your account, “”DECLINED”” should pop up. However, banks like Wells Fargo, Chase, Washington Mutual, Bank of America and other major banks and credit unions certainly wouldn’t want you to have your card rejected. Instead, in instances when you don’t have enough money, your bank will spot you however much money you are over, then charge you an overdraft fee averaging around $30 per transaction for their trouble. How nice!

That’s just what the banks want you to think: “”How nice, they saved me the embarrassment of having my debit card rejected when I went out to eat with my girlfriend and her parents!””                            

But it’s more sneaky than anything. Banks claim that this interestingly named “”overdraft protection”” is a convenience for customers who wish to avoid such awkwardness. A “”convenience”” meaning you are automatically signed up for it once you get a bank account and are often not given the chance to opt out of the service. The $30 fee is incurred no matter how much or how little the account is overdraft. You go over $100 you pay the bank $30. You go over ten cents you pay $30. You overdraft on a $3 cup of coffee at Starbucks then a 50 cent bagel at the U-Mart, that’ll be $63.50. 

When little mistakes happen, as they tend to do every once in awhile, the bank seems a bit too eager to offer this “”convenience”” when every other convenience in any other institution usually requires some sort of enrollment or monthly fee. Additionally, debit card transactions can be downright confusing when looking at your online statement. Banks sometimes wait days to post subtractions to online banking accounts, which can lead people to mistakenly think they have more money than they actually do. And when you think you have more money than what is reality, there’s the danger of overdraft.

Overdraft protection is fine for those who want a $30 “”embarrassment protection”” fee, but banks should really let the customers decide whether or not they want this service before they start paying for overdraft charges. Allowing money to be subtracted from accounts even when funds are insufficient seems to be an underhanded scheme by banks to force people to buy on credit and charge them outrageous penalty fees.

— Arianna Carter is a creative writing junior. She can be reached at letters@wildcat.arizona.edu.

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