| Overspending on Debit Cards Is a Boon for Banks |
| Posted by: AJ |
1:45am, Monday, 14 September 2009 |
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| Banks market it as overdraft protection, and the fees it generates have become an important source of income for the banking industry at a time of big losses in other operations. This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance. In fact, banks now make more covering overdrafts than they do on penalty fees from credit cards.
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And when a consumer does overdraw an account, banks have found a way to multiply the fees they collect by rearranging the sequence of transactions, critics say. Ralph Tornes, who lives in Florida, is pursuing a lawsuit against Bank of America for charging him nearly $500 in overdraft fees in 2008 after it rearranged his purchases from largest to smallest. In May 2008, for instance, Mr. Tornes had $195 in his account when he made two debit purchases for $8 and $13; the bank also processed a bill payment of $256. He claims that Bank of America took his purchases out of chronological order and ran the biggest one through first. So instead of paying $35 for one overdraft fee, he was stuck with three, for a total of $105. |
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