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the money to pay for it. CRL analyzed an independent database of personal banking account transactions documenting more than 8,500 overdrafts, and surveyed 2,400 checking account holders. They found that account holders have more overdrafts caused by a debit card purchase than by a written check, that debit card overdrafts are more costly, and that survey respondents would avoid the fees if given the choice. Specifically:
• Approximately 46% of all overdrafts are triggered by debit card (POS) transactions or ATM withdrawals, while paper checks trigger 27 percent of overdrafts.
• Debit card POS overdraft loans are more expensive than over- draft loans from any other source, including overdrafts by check. Debit card POS overdrafts cost people $2.17 in fees for every dollar borrowed, compared to check overdrafts, which cost $.86 per dollar borrowed.
• Most survey respondents—over 60%—would prefer that the bank deny a debit card purchase that overdraws their account, and nearly all would cancel their ATM withdrawal if warned they had insufficient funds.
In addition to the information from the Center for Responsible Lending, here’s what the Colorado Society of Certified Public Accountants (CPAs) says you need to know to manage your use of debit cards.
Dispute Resolution Differs for Debit Cards
When you purchase an item with a credit card and that item turns out to be defective, you have a right to withhold payment until the issue is resolved. This right is protected under the Fair Credit Billing Act. However, in merchant disputes where a debit card has been used for the purchase, dissatisfied debit card customers don’t have the same protection.
Using Debit, Check and ATM Cards 43