FDIC Consumer News
FDIC Consumer News provides practical guidance on how to become a smarter, safer user of financial services. Each issue offers helpful hints, quick tips, and common-sense strategies to protect and stretch your hard-earned dollars.
Here are some of the areas addressed in the current issue:
- Banking in a High Tech World
- Protecting Your Plastic from High Tech Criminals
- Solving Common Debt and Credit Problems
- Contacted by a Debt Collector? Proceed with Caution
Consumer Compliance Outlook
Consumer Compliance Outlook is a Federal Reserve System publication dedicated to consumer compliance issues.
Delete That Text! You didn’t win a Gift Card!
Cell phone users nationwide are receiving suspicious text messages that claim to be from a major retailer. The texts tell consumers they won a drawing for free gift card and all they have to do is go to a website and enter their address and phone number.
Gift Card Scam
Scams involving purported “free” gift cards have been reported throughout the country. In March, the Better Business Bureau reported a scam in which many people received text messages promising “free” Walmart and Best Buy gift cards. One such message read, “Walmart $1,000 gift card for the first 1000 users to go to [link] and enter code 2938.” Another said, “You have been randomly selected for a Best Buy gift. Get your $1,000 gift card at [link].” Neither of these offers panned out.
This type of scam is known as “SMiShing”, a type of “phishing” scam where the scammer sends you a text message, instead of an e-mail. If you click on the link in the text message, you’ll be required to provide personal information such as your credit card number or social security number before you can claim any gift card. The scammers then use this information to steal your identity.
If the link provided in any text (or e-mail) message doesn’t lead you directly to a page on the company’s main website, it’s more likely than not that the offer is a scam.
Walmart does give away legitimate gift cards to the winners of drawings for receipt surveys, and these drawings take place four times per year. However, the winners of these gift cards are always notified by certified mail, not via email or text message.
Walmart, along with most other major reliable retailers, will never send you a text, telephone, or e-mail message asking for your personal information.
Consumers should not respond to any messages that ask for this kind of personal information. Also, you should never click on any links provided in the message. The scammers who send these messages are just trying to get your personal information. Walmart’s current policy is that it never asks consumers, either online or in e-mails, to complete online surveys in order to receive a gift card. And Walmart will not send you any e-mails or surveys that require you to make a purchase or pay money as a condition for participating.
Consumers receiving this type of text message should report it by forwarding the text message to 7726 (“S-P-A-M”). You can also report it to your state consumer protection agency and to the Federal Trade Commission (FTC) by calling 1-877-FTC-HELP.
You Won the Lottery…But Didn’t Buy a Ticket
Lottery and prize winning scams come in many shapes and forms. Don’t fall for fantastic offerings of foreign lottery winnings, dream vacations, exciting prizes of money, a new car, a shopping spree or new technology, especially if you don’t recall entering to win such offerings. Unexpected prize and lottery scams rely on your excitement, to dupe you into paying fees to claim your prize, or into providing private personal, banking and credit card information for purposes of identity theft.
Credit Reports and Credit Scores
Your credit history is important to a lot of people: mortgage lenders, banks, utility companies, prospective employers, and more. So it’s especially important that you understand your credit report, credit score, and the companies that compile that information, credit bureaus.
Protect Yourself from Overdraft and Bounced Check Fees
Here are some answers to commonly asked questions…How do overdrafts and bounced checks happen? How can you avoid overdraft and bounced-check fees? What are “courtesy overdraft-protection,” or “bounce coverage,” plans? How much do courtesy overdraft-protection, or bounce coverage, plans cost?
How do overdrafts and bounced checks happen?
- write a check,
- withdraw money from an ATM,
- use your debit card to make a purchase, or
- make an automatic bill payment or other electronic payment for more than the amount in your checking account, you overdraw your account.
Your bank has the choice to either pay the amount or not. If it pays even though you don’t have the money in your account, you may be charged an “overdraft” fee. If your bank returns your check without paying it, you may be charged a “bounced-check,” or “nonsufficient funds,” fee. And the person or company that you wrote the check to–for example, a store, your landlord, or the phone company–may charge you a “returned-check” fee in addition to the fee your bank charges you.
How can you avoid overdraft and bounced-check fees?
The best way to avoid overdraft and bounced-check fees is to manage your account so you don’t overdraw it.
- Keep track of how much money you have in your checking account by keeping your account register up-to-date. Record all checks when you write them and other transactions when you make them. And don’t forget to subtract any fees.
- Pay special attention to your electronic transactions. Record your ATM withdrawals and fees, debit card purchases, and online payments.
- Don’t forget about automatic bill payments you may have set up for utilities, insurance, or loan payments.
- Keep an eye on your account balance. Remember that some checks and automatic payments may not have cleared yet.
- Review your account statements each month. Between statements, you can find out which payments have cleared and check your balance by calling your bank or by checking online or at an ATM. Be sure to find out the actual amount in your account–your account balance not including any funds available to you through “courtesy overdraft-protection,” or “bounce coverage,” plans.
Sometimes mistakes happen. If you do overdraw your account, deposit money into the account as soon as possible to cover the overdraft amount plus any fees and daily charges from your bank. Depositing money into your account can help you avoid additional overdrafts and fees.
What are “courtesy overdraft-protection,” or “bounce coverage,” plans?
Many banks offer “courtesy overdraft-protection,” or “bounce coverage,” plans so that your checks do not bounce and your ATM and debit card transactions go through. With these plans, you’ll still pay an overdraft fee or a bounce coverage fee to the bank for each item. But you will avoid the merchant’s returned-check fee and will stay in good standing with the people you do business with.
How much do courtesy overdraft-protection, or bounce coverage, plans cost?
Plans vary, but most banks charge a flat fee (often $30 or more) for each item they cover. And many set a dollar limit on the total amount your account may be overdrawn at any one time. For example, the bank might cover overdrafts up to a total of $300, including all the fees. In addition, some banks charge a daily fee–say $5 a day–for every day your account is overdrawn.
Example: Suppose you forgot that you had only $15 in your account and wrote a check for $25, used an ATM to get $40 cash, and used your debit card to buy $30 worth of groceries. In these 3 transactions you’ve spent a total of $95–and overdrawn your account by $80 ($95 – $15 = $80). How much will your forgetfulness cost you?
If you have a courtesy overdraft-protection plan, your bank may decide to cover all 3 transactions. And each of the 3 overdrafts will trigger a fee. You will owe your bank the $80 that you spent even though it wasn’t in your account, plus the 3 overdraft fees. If your overdraft fee is $30 per overdraft, you will owe your bank $170: $80 + $90 (3 x $30).
What are some other ways to cover overdrafts?
Banks may provide other ways of covering overdrafts that may be less expensive. Ask your bank about these options before making your choice. You may be able to:
- Link your checking account to a savings account you have with the bank. If you overdraw your checking account, the bank can transfer funds from your savings account to your checking account. Ask your bank about transfer fees.
- Set up an overdraft line of credit with the bank. You need to apply for a “line of credit” just as you would apply for a regular loan. If you overdraw your account, the bank will lend you the funds by using your line of credit to cover the overdraft. You will pay interest on this loan, and there may be an annual fee. But the overall costs may be less than the costs for courtesy overdraft-protection plans.
- Link your account to a credit card you have with the bank. If you link your account to a credit card, any overdraft amount becomes a cash advance on your credit card. You will probably be charged a cash-advance fee, and interest charges on the advance will start immediately. The cost of this option depends on the interest rate on your credit card and how long you take to pay back the advance.
The choice is yours. Consider these ways to cover your overdrafts:
|Ways to cover your overdrafts||Example of possible cost for each overdraft*|
|Good account management||$0|
|Link to savings account||$5 transfer fee|
|Overdraft line of credit||$15 annual fee + 15% APR|
|Link to cash advance on credit card||$3 cash-advance fee + 18% APR|
|Courtesy overdraft-protection plan||$30 or more|
|Bounced check||$60 or more ($30 bank fee +
$30 merchant fee)
* These costs are only examples. Ask your bank, savings and loan, or credit union about its fees.
What do you need to know about courtesy overdraft-protection, or bounce coverage, plans?
- Avoid using these plans as short-term loans –they are costly forms of credit.
- If you overdraw your account, get money back into your account as soon as possible. Remember that you need to put enough money back into your account to cover both the amount of your overdraft and any bank fees.
- Even if you have one of these plans, there is no guarantee that your bank will cover your checks, ATM withdrawals, and debit card and other electronic transactions that overdraw your account.
- Good account management is the lowest-cost way to protect your hard-earned money. If you need overdraft protection every now and then, ask your bank about the choices and services that are right for you.
What should you do if you have a problem or complaint about courtesy overdraft-protection, or bounce coverage, plans?
If you have a complaint, first try to resolve the problem directly with your bank. If you are unable to resolve the problem, you may want to file a complaint with one of the state or federal agencies responsible for enforcing consumer banking laws.
For more information, contact the federal agency responsible for regulating your financial institution.