Why I Feel That Debit Cards Are Evil

by : Keishon Martin

The widely popular Debit card/check cards offered by almost all banks have become the standard way to pay for everything from itunes music to rental cars. Where the government states that debit card transactions have grown more than 20 percent a year and have out grown more than all credit card transactions.

As there appeal is very understandable. As Debit cards are quick and easy to use. But using a debit card can cost you hundreds and even thousands of dollars a year, no really. So I will show you why you should never carry the evil debit card.

More Risky than Carrying Cash

First you must understand that all U.S. banking institutions lost an estimated $662 million to debit card fraud in 2005. Now guess what all these banks are trying to do? They are trying to recover this money that is being lost. You would probably be safer to just carry cash.

Although you really don't have much support if your card is lost or stolen, but at least your losses are limited to the amount of the missing money. With having a debit card you will put your entire bank balance this is in your bank account at a high risk. If you connect your checking account to your savings account in a attempt to avoid overdraft charges, you put the balance in both accounts at risk, as you will face severe overdraft charges.

Now think about this, where if a thief gets a hold of your credit card, the federal Truth in Lending Act will limit your liability for any fraudulent credit card charges to only $50 yeah that's right only $50. In which you may not even be obligated to pay that much, as these financial institutions will not impose any charges on their defrauded customers. And while the case of fraud is being investigated, you can refuse to pay any part of these unauthorized charges.

But the evil Debit cards fall under a very different set of laws, known as the Electronic Fund Transfer Act. You can limit your liability to just $50, it is a must that you notify your bank within two business days after discovering that you're debit card has been lost or stolen. And if you wait longer than that, but if you wait to give your bank notice of the fraudulent transactions within 60 days of when your bank statement is mailed to you, then your maximum liability jumps to $500. So if you happen to miss that deadline, there is a good chance that you could lose all of the money in your bank account.

Because the debit card accesses the fund directly out of your bank account, you can be left without your grocery money while the fraud claim is being investigated.

Now this is stupid!

A single trip to Burger King was enough to send Tom Martin's checking account into absolute freefall. Where Tom had made the mistake of paying for some fast food with his debit card. He thinks he spent only about $3 more than he had in his bank account. But unfortunately, by the time he had realized that there was a problem, the bank had hit him for about $350 in overdraft fees. So at $35 per charge, it's easy to rack up hundreds of dollars in needless NSF fees.

There is a company in place, which is a consumer group, has estimated that overdraft charges from debit cards cost people about $8 billion dollars each year. I can remember a few years age when banks would refuse any debit card transactions that would overdraw a customers account. But not any more. As banks could warn depositors when their accounts are close to being overdrawn. But they don't.

Instead most of these financial institutions will automatically enroll their depositors in a program that loans their customers the amount of the overdraftbut at a steep price. The Center for Responsible Lending estimates that Banks that offer these lending programs can expect an drastic increase in overdraft revenues, as much as 200 to 400 percent per year.

With it being calculated as an interest rate, rather than a fee, the cost of these loans is ridiculous. The average amount of a point-of-sale purchase that overdraws an account is $14.75. But the average over draft fee is more than double that amount. According to the agency, most consumers only use these loans for a few days. So on an overdraft loan, the annual percentage rate can be as high as a WOPING 20,000 percent.

In defense of this practice, I consider to be financial rape, the bankers like to point out that it's the responsibility of the account holders to monitor their account balances and avoid overdrafts. Which is ridiculous but, of course, that requires the account holder to know how much money is in their account. Which is the reason why we trust banks to hold our money for us but instead the choose to take us for every hard earned dollar that we have. I think that I will just stick to carrying cash