The Danger of Using Debit Cards Instead of Personal Checks
Just about everyone has a debit card. They are both quick and convenient to use, and you don't have to be concerned with falling into debt as with a credit card.
However, there are some serious disadvantages to using a debit card of which you should be aware. You may find that using personal checks more often is a wiser decision.
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 they make much of their profits from charging customers fees for certain services. One of the biggest money makers is overdraft protection.
According to the Government Accountability Office, revenue from savings and checking accounts jumped about 48 percent between the years 2000 and 2007.
Banking industry analysts report that money being made by financial institutions through overdraft fees almost doubled from 2000 to 2009 reaching more than $37 billion! More than half of that came from charges applied to debit and ATM transactions.
Think about 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. Now your bank charges you a $25 fee because you have overdraft protection.
That's equivalent to being charged an interest rate or 1,000% - much worse than any credit card! That's because the fee you're charged for overdrafting is the same with any amount you spend.
Thankfully, there is a new law that requires banks and credit unions to give customers the option of refusing 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.(Read more about the New Overdraft Protection Rules)
One possible issue with the new rules regarding overdraft protection is that because banks will be 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 chargers for those fees at your bank. Financial experts predict many banks will get rid of free checking completely.
The reason most people overdraft when using debit cards is because they have no clue how much they have in their account. Using checks could be the solution to this problem.
It's true that you can still be charged NSF fees for bouncing personal checks. However, it is also a proven fact that people who order personal checks and use them with a check register have a better grasp on their personal finances.
Keeping a close eye on your finances is very important. An FDIC study recently found that just 13 percent of all checking customers pay 93 percent of all overdraft fees. That 13 percent includes people classified as "financially disorganized."
You can get your finances organized when you order checks from Check Advantage! Personal checks are available for as low as $10.95 - that's our everyday low price - not a one-time offer.
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