Marketplace Scratch Pad

A debit card is not a credit card

Scott Jagow Jun 29, 2009

I know that seems like a duh statement. But my point is that those new credit card reforms just passed by Congress don’t apply to debit cards. Perhaps you can see where this is going.

The New York Post reports that banks have started jacking up their debit card fees:

Earlier this month, Bank of America announced a $35 fee for most debit-card overdrafts — plus a second $35 fee if it isn’t repaid in five days.

In March, PNC Bank hiked its sustained overdraft fee by 16 percent to $7 a day.

The moves by BofA and PNC follow inflated international fees set by Citigroup and a new, 2 percent foreign fee imposed by Discover Cards.

These upticks not only deftly sidestep the new credit-card law — which does not address debit cards — but come at exactly the time the popularity of debit cards among American consumers surpasses that of credit cards.

The Washington Post has more on “overdraft protection,” which could be the next target for regulation:

Jean Ann Fox, director of financial services for the Consumer Federation of America, said overdraft programs are often not explained when consumers open accounts, and many don’t have opt-out provisions. In a survey of the 16 largest banks, the federation found that all of them charged overdraft fees without the consumer’s consent.

“If I were a bank, I wouldn’t want to tell you I would charge you $70 for letting you overdraw $20,” Fox said.

The Federal Reserve has taken notice and is considering new rules that would crack down on automatic overdraft protection.

Obviously, it’s up to customers to keep track of how much money is in their account, and they won’t have to worry about overdraft fees. But any small mistake, and the banks will make you pay.

It’s hardly surprising. They’re running a business, and one of their major sources of income, credit cards, was just re-regulated. You know they’re going to look for ways to make up for any lost revenue.

Beyond overdraft, I won’t be surprised to see fees cropping up elsewhere — fees specific to debit card usage.

So keep a close eye on your account.

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