Piling on
September 27, 2009 | Washington Post, alternatives, industry | Comments (0)The Payday Pundit think that overdraft protection that consumers opt in to is a useful credit product. That’s why I’m a litte surprised about the extraordinary criticism in the newspapers these days. From today’s Washington Post personal finance columnist:
But government has every right to rein in an industry practice that in many cases has become predatory by design, allowing customers to overdraw their accounts.
No matter which side you think is right or wrong on this issue, I must point out a troubling trend that just won’t die: The financial industry continues to greatly profit from consumers’ love affair with plastic.
Many of the overdraft penalties come from debit card transactions. In less than 15 years, debit card transactions in the United States have grown from 1 percent of noncash transactions to more than 50 percent, according to new research from TowerGroup.
As access to credit tightened and people pulled back from using credit cards, they used their debit cards more.
Because debit cards are linked to individuals’ banking accounts, customers supposedly are forced to spend only what they have in their accounts. The financial institutions have actually convinced some people that using a debit card is the same as using cash.
It’s not.
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