The Debit Card Overdraft “Protection” Trap | Richland Library Skip to content

The Debit Card Overdraft “Protection” Trap

If you own a debit card, your bank has been legally required to ask your permission to extend their “courtesy overdraft protection” for your card. Do you remember what answer you gave them? If you said yes or otherwise don’t remember, read on!

Overdraft protection sounds like a brilliant service, right? But do you realize what actually happens if you overdraw your checking account while using your debit card? Your bank will allow your transactions to go through, but then you will be penalized with a large fee for every single time you use your card and overdraw your account.

For example: you’re out shopping and using your debit card. You stop by several stores and you are unaware that your account balance somehow trickled down to $0. However, because you agreed to take overdraft protection, your card is never declined as you shop. Instead, you find out later that because your bank allowed you to continue to use your debit card, they socked you with a fee for EVERY SINGLE TRANSACTION from that day. This actually happened to me after a significant math error on my part, and I wound up being charged $175 in fees for 7 transactions.

Wouldn’t it have been better if my debit card had been declined at the register, instead of being forced to pay all of those fees? Having to pay a $35 fee for the opportunity to spend $5 at Sonic was a tough pill to swallow. If I had known I’d overdrawn, I wouldn’t have continued using my debit card, but my bank didn’t tell me until after they’d already charged me a lot of money. Does it sound like my bank was “protecting” me?

You have the option to say no to your bank’s overdraft protection plan. Many people don’t understand that this service actually benefits the bank, not the customer. If you aren’t sure if you opted yes or no, call your bank and find out. Opting out of overdraft protection could save you hundreds of dollars should you accidentally spend too much.