In an earlier post, I mentioned that certain things are better in Canada, notably Canadian debit transaction. I reported that in Canada, if you do not have enough money in your account to cover a purchase, your debit transaction will be declined. You may not be able to buy that $2 bottle of Coke, but you won’t be dinged with $30+ of bank fees. It seems that American consumers want this as well. To quote another article authored by Liz Pulliam Weston:
In recent years, most banks started approving, rather than declining, debit and check transactions that exceeded what customers had in their accounts. Consumers would rather pay $34-a-pop bounce fees, banks contend, than risk embarrassment at the checkout counter.
Turns out: not so much. A survey (.pdf file) for the Center for Responsible Lending indicates a vast majority would prefer a choice in whether transactions were approved by their banks. Furthermore, most want their banks to decline the kinds of small transactions that typically trigger the fees.
The survey by Opinion Research found:
- 82% of the 2,023 adults polled wanted to choose whether bounce protection was added to their account. Bounce protection is typically instituted automatically if you don’t have true overdraft protection, which links your checking account to a savings account, credit card or line of credit.
- 72% to 74% would prefer their banks decline rather than process transactions of $5 to $40 that caused an overdraft fee. According to the center’s research, the typical debit card transaction that results in a bounce fee is for a $20 purchase. Overall, Americans paid $17.5 billion in bounce fees during 2006 to cover $15.8 billion in overdrafts.
This isn’t just an issue for the young, broke and careless, by the way. About a quarter of those overdraft fees were paid by Americans over 55, the center estimates. Low-income seniors who rely on Social Security paid about $1 billion of the total.
I do encourage all of you to watch Liz’s video. It provides useful advice to Americans as to how to avoid being gouged by banks.