You know how convenient it is to have your bills auto paid right? And you usually have two options, direct bacnk account withdrawl (ACH) and credit card / debit card. Well, next time you set one of these up, use your debit card, not direct withdrawl. I’ll tell you why in a minute.
First, some background… Recently most of the big banks (Bank of America, Chase, Wells Fargo, etc…) have lost class action law suits because of the un-ethical way they have been cheating their customers out of over draft fees. What they have done for many years is re-order your purchases for the day from largest to smallest. So, let’s say you have $50 in your account, but you think you have $80. You start your day by buying a Slurpee from 7-Eleven $1.59, than, you buy some lunch ($7.95), on the way home you get some taco bell for your kids ($5), while in the bathroom you download a new game from iTunes, and during some downtime at work, you use your Amazon Prime account, and overnight a snickers bar. On your way home you stop to fill up your tank ($51) and without knowing it, have over drafted your account. So, it shouldn’t be too bad, I mean you only over drafted on your gas right? Up until then you had enough money for everything? Well, until recently instead of one overdraft, you would have had 7. Because… The banks wouldn’t post everything to your account until the end of the day, when they would re-order the charges going from largest to smallest. So, your largest purchase (the $51 gas fillup) puts you in overdraft, then all your other purchases are overdrafts as well.
Fortunately, consumers got wise, greedy lawyers stepped in and sued the pants off the banks. The list of banks sued so far includes: Wachovia, Citibank, Bank of America, KeyBank, FirstMerit, and lots lots more… In fact, odds are you are eligible for part of the class action settlement (pretty much anyone who has had an overdraft fee in the last decade is). Some of the settlements are done, but some of the banks are still in court fighting.
So, here is why you should use your debit card instead of ACH. Due to this obvious abuse of consumers who are careless by the banks. Congress stepped in and said “Alright guys, since you can’t be trusted to play nice, we’re going to force you.” (Which I believe is the cause of LOTS and LOTS of legislation) And passed a law that makes it so the consumer MUST opt-in to over draft “protection” from now on, if you don’t have the money and a charge comes through your debit card, unless you have specificaly (and foolishly) said “Yes, please protect me next time I buy a candy bar and don’t have the money and charge me $35 for letting me spend money I don’t have.” They cannot pay the charge and charge you an over draft fee. Instead, they decline the charge because you don’t have the money. (Isn’t that AWESOME!) BUT!! It only applies to debit card purchases. So, next time you setup automatic bill pay for something, don’t use the automated “bank draft” use your debit card instead. Unfortunately, the banks get a small percentage off the top of every debit card purchase you make (in the form of Merchant Account Fees), so either way the banks win, but this way, you don’t loose.
What is interesting, is that in our country there is a thing called “Small Claims Court”. If you really feel you are right, take someone to court. Odds are that they will just settle with you, it is a LOT cheaper for them to settle than for them to send a lawyer to defend them. So, the next time you feel that you have been unfairly treated by a company, take ‘em to court! Here is a guy that made a short documentary about taking Wells Fargo to court over overdraft fees. http://current.com/shows/max-and-jason-still-up/88849140_how-to-beat-the-bank.htm If more people did this to abusive corporations the corporations might hesitate to abuse.