Courtesy Pay or Overdraft for debit or ATM cards.

If you have no money in your account and you pay for a purchase with a debit card, what do you want your Bank or Credit Union to do?

1.) Decline to pay. That way I won’t spend money I don’t have and pay fees for the privilege.
2.) Pay it and charge me a fee and give me a few days to get the money there. That way I won’t be embarrassed in front of people.

There is a law that says the Bank or Credit Union has to get your permission in writing to do #2. Some financial institutions would charge a large fee, $35 for example, for each transaction. The average fee is $29. So a movie ticket, popcorn at the snack bar, and coffee at the local coffee shop after could cost $105 in fees in addition to the actual costs. Or an ATM withdrawal could cost a lot more than the fee the ATM owner and your financial institution charge. Some financial institutions also charge another fee for every day your account balance remains negative.

Most accounts have a limit (say $200) that the financial institution will let you overdraft. Some of the financial institutions would add your allowable overdraft amount to the amount they reported as your “available balance” when you checked the ATM. Trying to fool you into thinking that you had more money in your account than you actually had. And encouraging you to rack up those fees.

Decide whether you want “courtesy pay” on your debit card before you open the checking account. Decide if you want “courtesy pay” on checks you write, which is a separate decision. Don’t sign up for anything you don’t want, no matter how persuasive the representative is.

This post applies equally to banks and credit unions.

“Courtesy.” I do not think that word means what you think it means.

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