Nearly everyone uses a debit card these days, and why not? They are easy to use and convenient. Not to mention, using your debit card is much more responsible than using a credit card. However, there are some serious disadvantages to using a debit card, of which you should be aware. You could discover how using your personal checks can be a wise choice. You might assume that banks do not appreciate overdrafts and would consider you a bad customer if you continued to use your debit card with insufficient funds in your checking account. But you'd be wrong. Financial institutions used to make most of their money by investing the funds you deposited. Today, banks make a lot of their money by charging fees to people like you for specific services. One of the biggest money makers is overdraft protection. The Government Accountability Office has reported that revenue financial institution gained from checking and savings accounts increased around 48% from 2000 to 2007. Financial industry analysts say that money made by the banks from overdraft fees nearly doubled from 2000 to 2009. The total was more than $37 billion! More than half of that came from charges applied to debit and ATM transactions. Consider this...let's say you buy a gallon of milk at the grocery store for $2.50 and use your debit card. You were unaware that your checking account balanced had dropped to zero, and you overdraft the account. The bank ends up charging you a $30 fee because you still have overdraft protection on debit card purchases. Think about it. That's almost the same as being charged an interest rate of 1,000% - way worse than the typical Visa or MasterCard! That's because the fee you're charged for overdrafting is the same with any amount you spend. Lucky for us, there are new requirements making it the law for banks to ask customers if they'd like to choose the option of declining overdraft protection. If you refuse the service, when you use your debit card or go to an ATM but don't have enough money in your checking account - your card will simply be denied. For most people, when their card does not go through they usually have another option such as a credit card, cash or personal checks. One possible issue with the new rules regarding overdraft protection is that because banks will most likely be losing millions of dollars, they will have to find somewhere to make up the loss. That will inevitably lead to more fees and higher charges for those fees at your bank. Experts in the financial industry think it's quite likely that banks will completely get rid of free checking. Most people overdraft with a debit card because they are completely unaware of their checking account balance. Using checks could be the solution to this problem. It's true that you can still be charged NSF fees for bouncing personal checks. But it's also a fact that people who order personal checks and use them with a check transaction register are more responsible with their personal finances. Keeping a close eye on your finances is very important. A recent study by the FDIC discovered only 13% of checking customers pay more than 90% of all overdraft fees. That 13 percent includes people classified as "financially disorganized." So start taking control of your finances. Opt out of overdraft protection if you think it could help. If your debit card is denied, you can always use another option like personal checks, a credit card, or even cash. About the Author: Kasey Steinbrinck has written in the television radio and newspaper industries. He now creates web content for Check Advantage, which offers personal checks and business checks directly to consumers. Visit http://www.checkadvantage.com/all-checks.html today. |
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