Another bank trick to stiff Brazil Americans.
Forty dollars for a Big Mac? That might sound over the top, but it barely tips the outrage meter when you compare it to the 20,000-percent-interest loan U.S. consumers regularly take out to pay for such $40 burgers. How could this be?
Well, bounced checks just aren't what they used to be.
A new study says that most of the time consumers overdraw their accounts now, bounced checks aren't the culprit. Instead, debit card purchases are chief cause of overdrafts.
Many people don't realize that a carefree swipe of their debit card at a point-of-sale terminal to buy a Big Mac could result in "courtesy overdraft" fee of $30 or more. But such fees are becoming increasingly common. When faced with a transaction that would send a consumers’ account into negative territory, banks now regularly approve such transactions, cover the expense, and charge hefty fees.
Financial institutions collected some $10 billion in 2005 through what's sometimes called automatic overdraft protection, according to the new study conducted by the Center for Responsible Lending. The agency reviewed full transaction histories for 5,000 typical American households to determine the cause of bounced check fees.
In its report, called "Debit Card Danger," the Center for Responsible Lending said that 38 percent of overdrafts were caused by debit card, point-of-sale transactions, while paper checks triggered an overdraft only 27 percent of the time. Online bill payments accounted for another 27 percent of overdrafts.
Most consumers have no idea
The trend concerns Eric Halpern, who co-authored the report. He believes many consumers still have no idea how expensive that Big Mac can be.
"If you ask people on the street what would happen if they tried to make a debit card purchase and their account was empty, most people assume the bank would deny it," he said.
redtape.msnbc.com
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