An overdraft protection program is in the works and the new policies it brings are supposed to protect cardholders from abusive and unfair practices from lending institutions. One of the main arguments against the overdraft fee system is many cardholders are automatically enrolled in an overdraft protection program which is sometimes not even known to the cardholder, so the new policy would allow cardholders the choice of whether to be enrolled in the overdraft program or not.
There are numerous cardholders who say banks practice shady methods in regards to their account by processing debits from the largest amount to the smallest. People argue this is done so the banks have a better chance at overdrawing an account. Some big banks are restructuring their overdraft protection programs and will only charge a certain number of overdraft fees per day and excuse any overdraft under a set amount but cardholders feel it is not enough.
Cardholders want the right to choose if they are in the overdraft protection program and they want the method that banks process the debts to go along with the order in which the debit are made. There are those who would like larger debits to come out first since usually those are recurring, big expenses like mortgage or car payments, but again, this practice can be abused by banks.
If a bank charges from largest debit to smallest then the cardholder’s account could be overdrawn on the first big debit and then again and again on the subsequent charges rather than having funds for the small charges and overdrawing on one large debit. This creates more overdraft fees for the variety of little purchases rather than just the one.
Supposedly, if cardholders were not in the overdraft protection program they would not be able to make a purchase. While in the overdraft protection program, charges can be continuous with overdraft fees piling up and many see this as an abuse of the banks overdraft protection program.
However, is the cardholder not the one responsible for their account? Many complaining about the overdraft protection program are wanting the bank to act as an accountant and closely watch each cardholder’s balance, but knowing how much money one has in an account and how to wisely spend that money is a responsibility that falls on the cardholder, not the bank. Are banks not justified for charging an overdraft fee when a cardholder either accidentally or irresponsibly overdraws their account? Either way the bank is left picking up the slack when a cardholder is spending money they don’t have.
So, are these new policies that are being worked out justified or should cardholders take more responsibilities for their finances? No one can argue the idea that the option for enrollment in an overdraft program falls to the cardholder, but should a bank be limited on the number of overdraft fees charged to a cardholder no matter the number of overdrafts that occur?
When looking to avoid high interest rate debts it might be best to simply avoid credit cards altogether. Unfortunately, some hard working Americans have been living off credit cards for multiple years and it could take decades to alleviate these issues. This has been a concern for years and it will not be fixed for quite some time.