That's what happened to one debit card user.
Overdraft charges amount to $17.5 billion each year, according to estimates by the Center for Responsible Lending. Whether for good or bad intentions, Banks have made it easier for debit card users to overdraw their accounts and to subsequently get charged fees.
Not so long ago, you couldn't so easily overdraft your account. Most banks made it standard practice to deny debit card purchases if you lacked sufficient funds in your account. But now, banks will actually help you overdraw by offering you a line of credit, commonly called overdraft protection. Of course this protection comes with a high fee instead of a standard loan interest rate.
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These overdraft fees are so high, that people would actually pay less if they went to a bank and set up a system to link their account to a savings account, a line of credit or a credit card to cover any overdrafts.
And, unless debit card holders keep accurate tracks of their balances, they make have less of a spending limit than they think since many banks don't have real time transactions. Hence, there will always be outstanding transactions that the cardholder has authorized but has not hit the bank.
Fact is, debit cards are really just plastic versions of checks, so cardholders must keep track of what they're spending just like when they used checks. Otherwise if you wait until the next debit card statement, it's too late.
Banks actually help make it hard to keep track of balances, especially when you overdraft via multiple debits. If you make five purchases of $100, $60, $25, $10, $5, for a total of $200 but you had only $175 in your account, the bank may actually charge you for three overdrafts (the $25, $10 and $5) instead of just one overdraft for the $60 charge.
Tips to Prevent Debit Card Penalties:
Talk to your bank or credit union about an option to draw funds from a savings account, and keep extra money in the savings account to cover overdrafts.
Don't pull out your debit card to buy small stuff that you can buy with cash. Small purchases are more difficult to keep track of and not all debits post as soon as they are made.
Keep a safety margin of extra money in the account.
Many banks will automatically enroll you in an overdraft protection program which can be costly. With this program, a bank won't reject your debit card purchases if you're short on cash, but you could be charged $25 to $36 for each bounced check or overdraft with a debit card. Fees vary by bank. Talk to your bank about getting fees cut or lowered.
Do not use a debit card to buy gas, check into a hotel or rent a car. A $100 hold can be put on some purchases with a debit card at gas stations even though you bought only $15 in gas.
Record every dollar you withdraw at ATMs, as well as what you spend with debit cards or checks. Take into account an extra $2 or $2.50 ATM fees if you use a machine your bank doesn't own.
Know that your bank likely will charge you a fee if you deposit a check from a friend and that check bounces.
Balance your checkbook. Keep a running tally of your purchases and any fees before you get the statement.
Check your account online. But understand that the balance you get online doesn't mean that all checks have cleared and that you have the amount listed to spend.
Debit Fraud Protection - Those crooks who try to take your ATM debit cards, do so to get access to your account. Just like we love our ATM debit cards and the 24-7 benefits of using them, crooks and thieves do too. When consumers don't monitor those accounts or they rarely use the card, they may not find out early enough if there has been fraud. Thieves do not have to have the PIN number to get at your money using a check card.
It can be easy for criminals to use check cards for telephone and online transactions and they do not have to give a PIN number or signature to the merchant on the phone or online. Charges are deducted directly from the checking or savings accounts. The cardholder may not notice the deductions until the next statement is sent, or unless they check the account online frequently. Risks can be greater when using check cards as they don't have the federal laws that safeguard them like credit cards do.
Some consumers do not understand the difference between a debit/check card and a credit card. Many consumers think that both cards have the same rights, and they can dispute transactions that are misrepresented or not delivered and this is not true. Even the protections are different between debit and credit cards that are stolen or fraudulently used. However, Visa or MasterCard voluntarily protects check cards they issue through member banks just as if they were credit cards. The maximum a defrauded customer may only be liable for is $50. Yet, each bank can have different policies concerning credit cards and check/debit cards.
When a thief uses a stolen debit card to get all the money in a checking account, that money could be gone for a while until your claim is investigated. If a soon to be ex-spouse takes your money, you may never get it back. Once theft is discovered, report it to the police. The account may need to be left open until the investigation is completed, which is another risk for the account holder. That means a partner who has a card on the same checking account could abuse an account for spite. Once all is clear, close the account and open a new one. It can take months before the bank decides if you have been a victim and are responsible for any fees or charges.
If there is not enough money in an account to cover purchases, that your soon to be ex-spouse made using your debit card, you will probably be responsible for paying bounced fees. One way or another, the bank will decide if you take the lose or them. Usually if a spouse is abusing the account, the account holder will probably incur any fees. It is important to review any rules for using check/debit cards and make sure the account is monitored at all times.