No More Overdraft Protection For Your Debit Cards

If you’re not yet sure about what you’re going to do about your debit card, the Federal Reserve—with its actions influencing economic directions—has already made the decision for you.

Their latest decision: you’re no longer entitled to overdraft protection whenever you make purchases using your debit card. Debit cards have long served Americans well. Debit card holders are enabled to directly transfer money from their bank accounts using their plastic cards to the sellers even without cash at hand. More importantly, the holders were almost always able to make important and expensive purchases to meet their household and business needs through the overdraft protection which extends to the use of debit cards.

Simply, overdraft protection is an arrangement between a client and the bank wherein the latter grants checks to the former. The amount to be written by the bank in such checks is for more than the amount present in the client’s account. There is an agreed limit of course as to how much the bank can provide in the checks which should be returned and paid by the client.

What do all this mean? Simple: when you’re at a restaurant to treat your four more colleagues because it’s your birthday and you just remembered that you do not have enough balance left in your account to fully pay for your expensive dinner, you can’t expect your bank to save you anymore. Your debit card will be rejected upon payment and you then have to settle costs incurred by you and your colleagues in this supposedly memorable dinner which you earlier promised you would take charge of. You can do this by directly paying cash if you have any or you can find another way to pay, by all means.

Maybe during your past birthdays, you never failed to provide a fine dining experience to your colleagues—albeit all at your own costs—which makes your birthday all the more memorable. With the remaining balance in your debit card before that might not be enough either, the banks did the trick of paying for you as it adds money to your account and charges you for a certain amount later.

This time however, this is no longer the case. Without the banks adding money to your balance for a certain fee anymore, affording what you used to purchase becomes even more difficult. Also, as in the scenario above, paying for something extremely important given your circumstance would obviously not like overdraft protection pulled out by banks.