Thursday, April 16, 2009

Courtesy or Bad Manners? What's your opinion?

Once upon a time, I overdrafted my account while paying for something at a local college bookstore. It was so long ago that I can't remember how I paid but it must have been by check. The manager called me at work (I don't remember why she would have my work number) screaming at me. She yelled explicatives and spoke as if I were a criminal or completely stupid. I remember saying to her, "Do you mean to tell me that you've never made a mistake and overdrafted your account?" That question completely disarmed her. Of course she had, who hasn't!

Although I got control over the situation, I was still embarrassed. And, obviously this left it's mark on me. At that time I was managing my money through one of the big banks. I didn't have automatic overdraft protection and didn't really know much about it. Years later I started working for a credit union and learned more about overdraft protection and all of it's glorious virtues. Then one day courtesy pay was introduced ...

Courtesy pay will cover your overdraft discreetly. If you don't have the funds in either your checking or overdraft account (typically your savings account) the transaction will be funded anyway. But there is a catch. That courtesy will cost you a fee. The amount of the fee varies from $20-$35 depending on the financial institution. Both banks and credit unions offer courtesy fee.

The courtesy pay fee created mild controvesy but over time courtesy pay became accepted as a convenience. Now the controversy heats up again as less people and even less merchants deal with checks. Debit cards are now king because of the simple beauty that they pull funds from your checking account in almost real-time. The understanding was that if there wasn't cash the transaction would be declined.

But, more financial institutions are extending courtesy pay to debit card transactions. I wish I could say that it's just banks doing this, but that's not so, some credit unions also partake.

To be totally fair, not all debit transactions are always covered by courtesy pay. Point-of-purchase transactions often are not covered. That means if you are at, say for example, Target or an ATM your debit card can be declined. But, if you are shopping online, like at, and you've entered in all the debit card info including the security code on the back of the card that could be considered an "authorized" transaction and could be funded by courtesy pay. So in-person you might be declined, remotely you might not be declined. These are solid rules though, it could go either way depending on the discretion of the financial institution.

So what do you think, is it a courtesy or bad manners?

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