Decline my debit card, please

By Liz Pulliam Weston

Banks defend their bounce fees by saying the charges are actually a "courtesy" for their customers.

In recent years, most banks started approving, rather than declining, debit and check transactions that exceeded what customers had in their accounts. Consumers would rather pay $39-a-pop bounce fees, banks contend, than risk embarrassment at the checkout counter.

• Video: Watch Liz Pulliam Weston's report

Turns out: not so much. A survey (.pdf file) for the Center for Responsible Lending indicates a vast majority would prefer a choice in whether transactions were approved by their banks. Furthermore, most want their banks to decline the kinds of small transactions that typically trigger the fees.

• Talk back: Been hit by a huge overdraft fee?

The survey by Opinion Research found:

• 82% of the 2,023 adults polled wanted to choose whether bounce protection was added to their account. Bounce protection is typically instituted automatically if you don't have true overdraft protection, which links your checking account to a savings account, credit card or line of credit.
• 72% to 74% would prefer their banks decline rather than process transactions of $5 to $40 that caused an overdraft fee. According to the center's research, the typical debit card transaction that results in a bounce fee is for a $20 purchase. Overall, Americans paid $17.5 billion in bounce fees during 2006 to cover $15.8 billion in overdrafts.

This isn't just an issue for the young, broke and careless, by the way. About a quarter of those overdraft fees were paid by Americans over 55, the center estimates. Low-income seniors who rely on Social Security paid about $1 billion of the total.

But surely, now that banks know we want a choice, they're rushing to offer one, right?

(Pause for hysterical laughter.)

Consumer advocates have been warning about the dangers of banks' bounce-fee programs since they started gaining ground six years ago. (Banks took a cue from the credit card industry, which learned a while back that big money could be made by approving over-limit transactions and slapping customers with extra fees.)

I've been railing about "courtesy overdraft" for years, starting with "Don't be duped by bounced-check 'protection.'" Yet the programs have spread from a handful of smaller banks to most major institutions.

The reality is that banks are loath to give up such a profitable venture, and many still don't give customers the choice of shutting off bounce protection. Banks even resist the idea of giving consumers a warning when an ATM or debit card point-of-sale transaction would result in an overdraft -- something that's technically not that tough to do.

Continued: Everyone makes mistakes

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