Check your bank balance recently?
Debit card-linked accounts are most often hit with overdraft and insufficient fund fees — especially in the days leading up to payday and for purchases under $25, a government report Friday revealed.
Of all debit card-linked accounts, those owned by young adults — people under 25 years of age — are the most likely to get hit with overdraft charges, the report found.
In fact, that group will likely get hit with overdraft charges more than 10 times a year, the report, from the Consumer Financial Protection Bureau, said.
While most overdraft charges are higher than the price of the item purchased triggering the charge, banks insist it’s a service, even calling it “overdraft protection,” said Matt Schulz, senior industry analyst for Creditcards.com.
“It’s a question of when the convenience comes in,” Schulz told The Post. “It’s convenient at the point of sale because your card doesn’t get rejected. It’s less convenient at the back end when you get your bill and have to pay more. That’s what the trade-off is.”
People who are a few days away from getting their paychecks are probably better off putting smaller expenses on a credit card, Schulz said.
“I think that’s clearly a good choice and the cheaper alternative to these overdraft fees,” he said.
The median charge of $34 for the average $24 overdraft is equivalent to a 17,000 percent APR, according to the CFPB.
“Overdraft fees should not be ‘gotchas’ when people use their debit cards,” Richard Cordray, director of the CFPB, said in a statement.
While the overdraft fees can be high, they might still be a better option than taking out a payday loan, which can often charge even higher interest rates, said Kevin Yuann, director at NerdWallet.com
People who choose to have overdraft protection are three times more likely to have more than 10 overdrafts a year, the report says.
Banks collected more than $31 billion in overdraft fees last year, according to research firm Moebs Services.