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Question DetailsAsked on 7/7/2012

IS COURTESY PAY A RIP OFF FROM ANY CREDIT UNION?

MY QUESTION IS THAT I HAVE A CREDIT SCORE OF 668. I ALSO PAY MY BILLS ON TIME, AND I HAVE COURTESY PAY THAT PAYS UP TO $750 DOLLARS. ALSO THEY CHARGE YOU $28.00 DOLLARS FOR EACH BILL OR ITEM THAT NEEDS TO BE PAID. THEY ALSO GIVE YOU UP TO 45 DAYS TO PAY BACK WHAT YOU OWE. MY QUESTION IS ALSO DO YOU THINK THAT I SHOULD KEEP IT OR LET IT GO. I AM ONLY WORKING PART-TIME. ALSO IF YOU DONOT PAY BACK WHAT YOU OWE, IT GETS TAKEN AWAY. MY QUESTION IS DO YOU THINK THAT I SHOULD KEEP IT OR LET IT GO?

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2 Answers

0
Votes

The usual objection to so-called "courtesy pay" services is that it will kick in when you're making a purchase and don't realize that you don't have the money in the account.

For instance, if you pull out your debit card at the supermarket to purchase $25 in groceries, and you don't have that money in there, they'll advance it to you for their $28 fee. But you could easily have paid some other way, or just decided to put back some things so you didn't overdraw your balance.

There are generally two scenarios: one is when you've written a check or have a regular auto-pay scheduled. The other is in a point-of-sale type of situation. The bank or other financial institution doesn't need your permission to do this in the first situation, they can either bounce the payment or honor it as an overdraft, usually they will charge you the same fee.

In the case of the point-of-sale usage, if they want to honor it and charge you a fee for doing so, they need your permission, and you probably don't want it in that situation, unless you can envision yourself at the 7-11, paying for a couple of items with your debit card, and you really wouldn't mind having $28 tacked on to the price you pay.

There may be a few people who feel this is beneficial, but it's absolutely shameful the way all categories of financial institutions try to spin this as a consumer-friendly feature that everybody should have. The Federal government was absoutely right to require banks to get explciit permission to do this, but it's unfortunate the way the financial institutions have abused this. They should be required to put in large bold print on every one of these permission forms: "IF YOU SIGN UP FOR THIS, YOU'RE PROBABLY A FOOL!".

Answered 8 years ago by Peter Piper

0
Votes

Excellent comment by PeterPiper on this type of bounced check/debit protection, aka "overdraft protection".


One other thing in addition to what he said - EVERY transaction that clears during the time you have a zero or negative account balance will incur the fee. Say you forget to fund the account and a large payment like a mortgage or credit card payment or large doctors/dentist payment by check (or debit card or auto-pay) went through, and they covered it (charging the $28.00 fee). Then another regular check or debit card usage hit - so they charge another $28.00. If you do not check your balance commonly or have auto-notification by eMail or text turned on, you could easily have a number of transactions clear before you realize your account has no money in it - racking up $28 charges (and quite possibly interest as well till paid back


So - not specifically a rip-off because presumably it is doing what you signed up for - but is a poor money management method and can run into the hundreds of $ in a month if you let your balance go to zero and stay there for a few weeks - especially if you use your checking account debit card a lot to pay for things. Generally - NOT considered a good thing to have, either from a financial standpoint (because of the potentially high cost), and also because if someone steals your checkbook or such then you are going to get a lot of fees charged to your account till it is closed - which you will then have to argue with them to convince them to waive, PLUS the issue of the overdraft "loans" that would have been granted (up to $750 in your case) which you would have to convince them are fraud before they will absorb the cost of them. Just generally not a good thing to be signed up for even if it does avoid some potentially embarrasing situations when your debit card is rejected for insufficient funds. [Note - not all debit card systems reject a low balancew charge - some go through THEN get rejected later, so you can be held liable for a bad check charge by the vendor, PLUS possibly a charge from the bank - so basically it comes down to one simple rule - know fairly accurately how much you have in your account at all times, and don't overedraw your account !


There are also federal enforcement actions undergoing against some financial institutions for forcing more of these overdraft coverage events (sometimes without customers even signing up for it) by ordering the day's transactions to debit the largest ones first regardless of what order they actually came into their system - thereby driving the account balance negative quicker, so all following transactions (even the smallest ones) till you add money to the account to give it a positive balance go into overdraft protection too. You can find more on that, on whether your institutions might be required to refund some of your fees, and how to minimize or avoid this expense, by looking at the following linked sample articles and also by googling this search phrase - CFPB overdraft protection action


http://files.consumerfinance.gov/f/20...


https://www.consumerfinance.gov/about...


https://www.consumerfinance.gov/about...


https://www.consumerfinance.gov/about...


Course, a bounced check fee is probably about as high or higher - so your solution is to either keep a higher balance in the account so it does not run dry, or maintain an up-to-date checking balance so you do not ever run the balance down to zero.

Answered 3 years ago by LCD




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