Debit vs. Credit

There are times when I am happy to be Canadian as I believe there are some things that are better in Canada. Now, I have discovered another reason: debit cards. It seems that Canadian banks surprisingly are less evil at times than American banks.

In today’s MSN Money, there was a piece entitled “Will debit cards outstrip credit?.” Here, it noted that Americans using their debit cards can be charged a fee if they spend more than they have. According to the article:

Now 14 of the 15 largest banks approve transactions but hit customers with a fee if they exceed the funds. It’s not unlike getting charged for bouncing a check. A recent study by found that overdraft fees now approach $29, up 3% in the past year.

Those penalties are easier to trigger, too. In the past customers had up to a couple of days — the time it takes for some debit transactions to clear — to deposit cash. But now many banks hit them with fees as soon as purchases are made.

It seems, based on reading this article, that the American debit system is lagging behind the Canadian debit card system (Interac). In Canada, when I buy something using my debit card, the money is withdrawn immediately from my account. If I do not have enough money to cover the purchase, then my transaction is refused indicating insufficient funds (a bit embarrassing, but that is another story). However, despite the cost to my self-esteem, I do not pay anthing as the bank will not charge me for a transaction that was refused. Simple system: no money, no purchase, no fee. In this case, I prefer the Canadian way of doing things. However, as the American banking system is milking clients for $50 billion worth of fees every year, it is unlikely they will change things any time soon.

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