2008 Woodie Awards
Take a seat, students: This is Debit Card Usage 101
Susan Tompor
Issue date: 9/5/07 Section: News
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DETROIT - Joseph Rizk, 20, figures it was one trip to Taco Bell that sent his checking account over the edge.
When he was a senior at Wayne State University, Rizk pulled out his Chase debit card to get some fast food. He spent about $5 more than he had in his checking account. He didn't spot the trouble early enough and ultimately got hit with about $350 in banking fees.
"I overdrew, and they pretty much pummeled me with charges," said Rizk, who graduated this summer with a bachelor's degree in biological sciences.
This is one story that's smart to share with anyone who is heading off to college. The debit card _ no matter how cute all those commercials might be _ isn't necessarily your best friend.
And at a time when many parents are struggling to cover higher tuition bills, the last thing a college student needs to do is trigger hundreds of dollars in senseless overdraft fees, too. The fees add up quickly at $25 to $35 a pop.
Overdraft charges are costing people about $17.5 billion each year, according to estimates by the Center for Responsible Lending, a consumer group that analyzed data on overdrafts. Banks have made it easier for consumers to overdraw their accounts and rack up big fees.
Young consumers who prefer paying with plastic, instead of paper, are vulnerable.
About 45 percent of overdrafts are attributed to using a debit card or taking out cash from the ATM, according to the center.
Pulling out a debit card to buy fast food has turned into a financial tripwire.
"In the past you couldn't overdraft at McDonald's, now you can," said Eric Halperin, director of the Center for Responsible Lending's Washington office.
Three years ago, Halperin noted, most banks routinely denied debit card purchases at the checkout lane if you did not have enough money in your checking account.
"The fact that you can overdraft with a debit card is relatively new," said Halperin, who favors legislation that would require banks to, among other things, disclose the annual interest rate on what consumer groups call overdraft loans to consumers. (Banks call the charges overdraft fees.)
When he was a senior at Wayne State University, Rizk pulled out his Chase debit card to get some fast food. He spent about $5 more than he had in his checking account. He didn't spot the trouble early enough and ultimately got hit with about $350 in banking fees.
"I overdrew, and they pretty much pummeled me with charges," said Rizk, who graduated this summer with a bachelor's degree in biological sciences.
This is one story that's smart to share with anyone who is heading off to college. The debit card _ no matter how cute all those commercials might be _ isn't necessarily your best friend.
And at a time when many parents are struggling to cover higher tuition bills, the last thing a college student needs to do is trigger hundreds of dollars in senseless overdraft fees, too. The fees add up quickly at $25 to $35 a pop.
Overdraft charges are costing people about $17.5 billion each year, according to estimates by the Center for Responsible Lending, a consumer group that analyzed data on overdrafts. Banks have made it easier for consumers to overdraw their accounts and rack up big fees.
Young consumers who prefer paying with plastic, instead of paper, are vulnerable.
About 45 percent of overdrafts are attributed to using a debit card or taking out cash from the ATM, according to the center.
Pulling out a debit card to buy fast food has turned into a financial tripwire.
"In the past you couldn't overdraft at McDonald's, now you can," said Eric Halperin, director of the Center for Responsible Lending's Washington office.
Three years ago, Halperin noted, most banks routinely denied debit card purchases at the checkout lane if you did not have enough money in your checking account.
"The fact that you can overdraft with a debit card is relatively new," said Halperin, who favors legislation that would require banks to, among other things, disclose the annual interest rate on what consumer groups call overdraft loans to consumers. (Banks call the charges overdraft fees.)
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