Overdrawn Accounts Via Debit Cards??

Recently there have been many articles published in the media about banks allowing customers to overdraw their bank accounts when making debit card transactions. I do not see it that way. Having worked in a bank call center I am familiar with this problem.

What consumers do not realize is that, in many cases, it is not the debit card transaction that overdraws the account. What happens is the account holder does not keep a properly balanced checkbook. The consumer will have outstanding checks that have not cleared the account. The consumer then goes out and uses his or her debit card to make purchases that they really do not have the money available in their bank account to cover. Since the debit card transactions are posted to the account first the money in the account is allocated for those purchases. Then the outstanding check that was written previously is posted to the account and causes an overdraft. Had the account holder been keeping a balanced checkbook, they would have been aware that the funds were not available to allow for the debit card transactions. Contrary to what is commonly written, including the below linked article, banks are not purposefully allowing overdrafts because of debit card transactions. They are required to pay debit card transactions as they come in because they cannot be returned as checks can be. Therefore it is actually the checks that overdraw the account in instances where the outstanding check is presented against the account after the debit card transactions are posted even though the checks were written first. The bank does not know what checks are outstanding.

The solution to this problem is simple. In order to avoid overdraft fees and the problem of returned checks, regularly balance your checkbook. When a check is written, deduct it from the available balance so that you have an accurate available balance. Are there banks out there that do allow customers to overdraw their accounts on debit card transactions? Possibly, but I can speak for the bank where I worked and it was very common to have customers making debit card transactions that depleted the funds in their account and then an outstanding check would be posted against the account which caused an overdraft. There were, of course, insufficient funds fees associated with that and in addition to that the customer had the problem of having a check returned and may face repercussions from the presenter.

To view the related article cut and paste the following link into your browser:

http://www.nytimes.com/2009/08/20/opinion/20thu1.html

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3 Responses

  1. Why don’t the banks just balance checkbooks for their customers? I mean, who wants to take a few seconds to think about how much money you have when your in the heat of the consuming experience?

  2. Appreciate your site. Extremely helpful posting.

    • Fatima, thank you for reading. I’m glad you enjoy the content. Please bookmark and check back frequently. I will be updating content on a more regular basis in the very near future.

      -Lee

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