The Cost of Cards

The New York Times is running an article entitled, "Overspending on Debit Cards is a Boon for Banks." The article states, "Banks market (charging customers to spend more with their debit cards than they have in their accounts) as overdraft protection, and the fees it generates have become an important source of income for the banking industry at a time of big losses in other operations. This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance."

The article continues, "...The price is enormous. According to the F.D.I.C. study, a $27 overdraft fee that a customer repays in two weeks on a $20 debit purchase would incur an annual percentage rate of 3,520 percent. By contrast, penalty interest rates on credit cards generally run about 30 percent.

Questions to Consider for Younger Children

1. Describe a time in which you either earned some money or somebody gave you money? Do you like having money? Why or why not?

2. Have you ever wanted to buy something for yourself and found that you did not have enough money to buy it? What did you do? How did you feel? Why?

3. Do you think that somebody else should always give you money to buy whatever you want? Why or why not?

4. Have you ever borrowed money from somebody? Why did you borrow it? When somebody else loans you money do you think that it would be fair to pay them back the amount of money that they loaned you plus a little more? Why or why not?

Questions for Older Students

1. Vocabulary terms to Define/Discuss: Cover (financially); Overdraft; Federal Reserve Bank; Federal Regulations.

2. What is the difference between credit and debit? In what situations would it make more sense to use a credit card than a debit card? Why? In what situations would it make more sense to use a debit card than a credit card? Explain?

3. Do you think that banks should be allowed to charge fees, around $35, if somebody spends more with a debit card than he/she has in a checking account? Why or why not? Now, to challenge your thinking skills, develop an argument for the other side of this question.

4. Do you think that the New York Times should have run an article about overspending on debit cards on the first page of the newspaper? Is this really a current event? Why or why not?