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It sounds too good to be true. You don't need a bank account. You don't need a good credit score. You just load your paycheck onto a pre-paid debit card, and you can pay without the hassles of a credit card or the inconvenience of cash.

You've probably started to see pre-paid debit cards in stores - maybe you've even received one as a gift or purchased one for yourself. There's a lot to be said for pre-paid plastic, but unfortunately the old adage pretty much sums it up--if it sounds too good to be true, it probably is. As with bank accounts, regular debit cards and credit cards, banks have found a way to profit from our quest for convenience, according to the New York Times.

How? By charging you for everything under the sun, including activating the card, making purchases, checking your balance, going to the ATM and even just possessing it - it's called a monthly maintenance fee. Banks can also charge you for not using the card - an inactivity fee. As you can imagine, you can lose your money in fees faster than you can spend it.

Continue reading "The Expensive Truth Behind Prepaid Debit Cards" »

In light of growing discontent over their unfair debit card fees, some big banks are considering changing their tune - ever so slightly.

Financial giants JPMorgan Chase and Bank of America just announced changes to their overdraft protection policies. Though they won't eliminate the controversial program, both banks plan to limit the amount of overdraft fees a customer can rack up per day and allow consumers to choose whether to opt in to the program, which is currently automatic. But will it be enough?

Right now, many people don't even realize they're part of their bank's overdraft protection program - an ironic name, considering it doesn't do much to protect consumers - until they're surprised by overdraft fees on their bank statement. What is overdraft protection? When you overdraw with your debit card, your bank kindly allows the transaction to go through by covering the difference - without telling you about it.

Continue reading "Banks Limit Debit Cards Fees, But Will it Make a Difference?" »

Imagine opening up your bank statement and finding that the $5 lunch you bought with your debit card last week actually cost you $45. Sound outrageous? It is - but it's happening to bank customers across the county.

As more consumers choose to forgo credit and its accompanying interest and fees, banks are finding sneaky new ways to make money - in this case, through overdraft protection. Don't be fooled by its name. Though it sounds helpful, overdraft programs do nothing to protect consumers. All they protect is banks' bottom lines.

Here's how the program works. Let's say you're buying a $5 sandwich. You smartly figure that you'd rather not pay interest on such a small purchase, so you use debit - what should be the equivalent of cash, since it takes the money directly out of your account. But now let's say you don't realize the check you deposited a few days ago hasn't cleared yet - and you overdraw by 50 cents. Rather than decline your card, your bank let's you go ahead and make the purchase. You don't know anything is amiss until you get your monthly bank statement and see lunch that day cost almost 50 bucks in overdraft fees.

Continue reading "Banks Are Making Some Debit Cards More Expensive Than Credit" »

Faced with sky-high interest rates and increasing fees, many consumers are giving up credit cards in exchange for debit.

Like credit cards, debit cards are convenient - they don't require a trip to the ATM, don't involve making change, and make receipts obsolete since you can usually track your purchases on a bank statement. But they're also free of the major drawbacks of credit. Most importantly, they won't drag you down with that dreaded interest. And because you're limited to the money in your bank account, they don't encourage overspending like credit cards do. In fact, they're an excellent tool if you're trying to reduce your reliance on debt.

Debit cards almost sound too good to be true. And they actually can be if you're not careful. See, banks just had to find a way to make money off this new phenomenon - you didn't think they were going to let you get away with anything for free, did you? So they started quietly enrolling customers in an overdraft protection program.

Continue reading "Choose Debit Over Credit, But Be Wary of Overdraft Protection" »