Why do some banks intentionally let people overdraw their checking account with a debit card?

Question

My bank claims they will not approve the transaction over your account balance and any overdraft protection that you may have. I just can not see why people get overdrawn that just use debit card and write no checks.

Answer 1

At the time of the transaction, there may still be money in the account. Not all $ is deducted immediately as the card is used. Say on Friday there is $100 in the account, but $90 of purchases has not yet posted. You don't actually have $100 you have $10, but make a purchase of $50. Bank approves based on the $100 in account. So now you are overdrawn by $40 and whatever fees are assessed.

And it does not matter at some banks whether you use debit or credit. For example - I have National City Bank. When i use my card at Wal-Mart the money is taken out immediately (either debit or credit). But if I go to Sheetz and get gas, and use either debit or credit - it takes up to 4 business days.

Answer 2

Banks let people "intentionally" overdraw??? Whowever is utilizing the banking service is the one who overdraws! Anyhow, since the checks have to go through the whole clearing process it is possible to overdraw (but the check will bounce), but when it comes to electronic real time transactions i dont believe this is true. Unless the bank client has a contract for an overdraft account for short term leverage on the checking account.

As for people going overdrawn that is more of a personal financial planning situation. Some people use checking account and that is all. Some people wisely work with credit (checks, credit card, overdraft, financing etc.), some people are just helpless straight out spenders. I believe that the middle area is where you get the most out of your finances .. not so much the earth, not so much the sky.

Answer 3

I don't know about all banks, but my bank allows overdrafts up to a set dollar limit based upon your average balances and age of the account. I suppose some would prefer to have the debit transaction be decline rather than incur the overdraft fees. My daughter had trouble with that, so I asked the bank (it was a joint account) to turn off the overdraft feature. Subsequently her debit transactions would be denied if her account did not have sufficient funds.

Answer 4

Because even just using your debit card can cause problems.

Suppose you use your card at the gas station. They do not approve a specific amount, just that there ism oney in there.

You put in $20 worth of gas. It may not go through to your account for two days, depending on when the gas station processes the transaction.

If you then hit the ATM and it lets you withdraw what will later be pulled for the gas, you get and overdraw fee.

Thats just one example.

Anytime you use your debit card and choose credit, you take this risk. When you choose debit, the amount is immediately withdrawn. When you choose credit, it is treated like a credit card and not pulled till all the credit reciepts are processed. This can take up to 3-4 days, depending on the store.

Answer 5

Overdraft fees are big money makers for the bank. Some people don't like it when the bank allows them to overdraft on their debit cards, but some people would rather pay the overdraft fee than to have to deal with a "bounced" transaction.

Answer 6

Banks typically will allow a charge to go through that brings your account balance slightly below zero. This is done as a convenience to you to prevent an embarrassing situation.

They also conveniently charge you an overdraft fee for each transaction that causes your balance to drop further.

Answer 7

1. To make more money charging for interests over the mony you overdraw. You should review your credit before you buy something expensive.
2. Systems are no perfect. Takes some time to joint all your transactions and then put the right balance. Ususally technology is grouth enough to make all transactions ok and on-line real time balance... but it's not perfect.

Answer 8

Yes, the bank benefits from "letting" you overdraw, but if the account wasn't down to its last dollars, it wouldn't be overdrawn. If you manage your money well, then you should know when a debit card transaction will overdraw your account. Its all about planning and personal accountability. The bank shouldn't have to babysit your finanical habits, and if they make money off of your poor financial management, then oh well.

Answer 9

To be able to charge an overdraft fee, free money to them!

Answer 10

I believe it is for the overdraft fees.