Debit Card Fees

The popularity and usage of debit cards increases every year. Unfortunately, the fees that financial institutions charge on debit cards are increasing as well.

While fees like using a debit card at an ATM are growing, the main increase is in overdraft fees. Your debit card is tied directly to your checking account. When you swipe it, you are deducting money from your checking balance. Overdraft fees often range between $25 and $35 per transaction, so if you use your debit card three times in one day, your fees could be $75 to $105! Experts say that overdraft fees will cost consumers $17.5 billion this year, and 45% of those fees are due to debit card use. So what can you do to avoid these fees? Here are some ideas:

• Make sure you understand your financial institutions debit card fees. Have a clear understanding of their fees and policies. Know if they will approve debit card transactions if you don’t have the funds in your account, and how much they will charge.
• Opt Out of having your account debited if there are insufficient funds in the account. New federal regulations allow you to tell the financial institution that you want to have a transaction declined at a merchant if you do not have the funds in your account.
• Get some type of overdraft protection. Some financial institutions will set up a line of credit to cover you when you overdraw your account, others will allow transfers from a savings account. Either way is cheaper than paying overdraft fees.
• Don’t use your debit card for frequent, small purchases. Some people use their debit cards three or four times per day for $2.00 purchases. These types of transactions are easy to lose track of or forget. Use cash instead.
• Make sure you record every debit card transaction. Make sure you also deduct any type of transaction cost, like ATM fees.
• Balance your checkbook. This is the only way to make sure you have enough in your account to cover your checks and debit card transactions. You can go online daily and check your checking account activity.

Remember, your debit card is really just a plastic check. You have to keep track of what you spend to avoid the fees.