Debit Card Dangers

by Diane R. Schmidt

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Debit cards are a nice convenience to use, but they are also a big moneymaker for banks. For example, if you unintentionally let your balance get too low, each debit that comes through will bounce. With fees as high as $34 per bounce, this can quickly add up to hundreds of dollars in a matter of seconds. So for example, if you forgot to track a few debits and a large check went through, many banks will honor the large check and then bounce all the debits, even debits as small as $2. Here are some ways to avoid the banks stealing your hard-earned money:

Tip #1: Keep Your Balance as High as Possible

Keep a cushion of money in your account to avoid bouncing checks or debits. Also, find out if your bank allows you to transfer money from your savings account to your checking account, to cover any unexpected expenses.

Tip #2: Track Your Spending on the Computer

Sign up for your bank's online banking program. This is an easy way to see what is going on with your checking account. Also, buy Microsoft Money or another financial software package. These software packages allow you to do your checking account online and not have to use your checkbook ledger.

Tip #3: Use Cash, Instead of Your Debit Card

Cash can't bounce and that's the beauty of it. Also, I've found spending actual cash makes you more aware of what you are spending. It seems when you swipe a debit card, it's so easy to spend more because it doesn't seem like spending "actual" money. At the beginning of each week or payday, take out what you think you'll need and stick with that.

Tip #4: Don't Spend Deposits that Aren't Credited Yet

There seems to be a line of thinking that once you deposit a check in the bank, it's yours for the spending. This is not true. Most banks put holds on checks for several days, even up to a week. It's best to wait until the deposit has cleared before swiping your debit card at the store. Debits go through at lightening-speed, and if the bank chooses to continue to hold your deposit, you'll get huge fees on the "bounced" debits.

One way around the hold banks put on checks is to cash the check, and then deposit the cash. Cash must be available immediately for your use. This way, you won't have to wait several days for your money.

Tip #5: Understand Your Bank's Policies

When you open a checking account, many banks aren't clear as to how long they hold checks or how quickly they process debits and checks. Be sure to call and get any questions you have answered. If you don't like the answers they give you, it's a good idea to find a new bank.

Tip #6: If You've Gotten Burned Already, Fight Back When it comes to burning customers with bounce fees, banks hope you won't fight back and request courtesy credits. If you've been a good customer, call and explain the situation and see if they'll credit the majority of the bounce fees. If you find yourself in the same situation a second time and losing more money in bounce fees, consider finding a new bank with more customer-friendly policies.

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