Debit card slip-ups cost consumers plenty

03.25.09
By Nicholas Storie

Banks that automatically enroll customers in overdraft protection services say it is a courtesy, but some account holders hit with fees are not so sure.

Consumers that spend more than they have in the bank - typically with a debit card purchase or at the ATM - are being hit with on average a $34 fee for the bank to cover the transaction.

This has added up to $17.5 billion annually charged to customers, says advocacy group Center for Responsible Lending.

A new survey from the same group shows that 80 percent of individuals would like an opt-in choice for these types of overdraft protection services instead of the bank automatically enrolling them upon account opening

"Consumers should be able to decide whether banks should cover shortfalls in the first place," said Leslie Parrish, senior researcher at the Center for Responsible Lending. "Otherwise, they're making high-priced loans that consumers haven't asked for and in many cases don't even want."

The Federal Reserve Board is currently considering two proposals that would help protect consumers against overdraft fee abuse. Consumers can comment on both proposals through the end of the month.

Meanwhile, USA Today recently reported that some banks are now embroiled in legal action as a result of consumers being subject to these overdraft fees.

Bank of America recently settled a class-action lawsuit paying out $35 million to individuals who say that the bank authorized transactions that ultimately resulted in consumers paying overdraft fees, according to the newspaper.

Before using your debit card to make a purchase or withdraw cash, check to make sure your account balance is high enough. A number of consumers use online banking as a quick way to stay on top of account transactions.

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Some consumers surprised by overdraft fees