A word of caution! According to Carol Kaplan, spokeswoman for the American Bankers Association, most overdrafts today are caused by debit cards. Since debit cards are linked directly to your bank account, debit card users should be concerned about overdrawing their accounts.

Even though the Federal Reserve recently imposed rules that will make it harder for banks to slap customers with overdraft fees, at present, most banking institutions are charging an average of $34 per transaction in overdraft fees. Not a good thing to have happen!

Consumer groups and lawmakers have chastised banks for using “courtesy overdrafts” to pay transactions even though customers don’t have the money in their accounts to cover them. The banks then charge account holders a high overdraft fee. Banks say they’re providing a service.

To avoid becoming an overdraft victim, keep track of your transactions and record them. Keep a cushion of money in your checking account and link your checking account to a savings account, so it covers you if you overdraw your account. If you use an overdraft line of credit, repay it as quickly as possible. You can also sign up for electronic alerts that automatically notify you when your checking account balance drops below a certain level.*

*Information gathered/quoted from the November 30, 2009 Bellingham Herald article, More holiday cards are debit; be careful how you use them  by Pamela Yip.