The fee on a debit card overdraft can be as high or higher than the amount drawn out.

The fee on a debit card overdraft can be as high or higher than the amount drawn out. Instead of overdrawing their accounts, consumers would be much better off either not spending the money, using a credit card or paying cash. Typically, the people most likely to sign up for overdraft “protection” are those who can least afford it – they have maxed out their credit cards and used up any home equity. Is it ethical for a bank to offer an overdraft plan?

Expert Solution

Yes, it is ethical for the banks to offer an overdraft plan. Under rules though, banks are not allowed to overdraw an account and charge the fee unless the consumer signs up for an overdraft plan. This rule means that consumers who do not “opt in” to the overdraft plan will not be allowed to overdraw their account, no matter how desperate they are.

So, the fee on a debit card overdraft can be as high as or higher than the amount taken out, instead of overdrawing their accounts, consumers would be much better off either not spending the money, using a credit card, or paying cash. As people most likely to sign up for overdraft are likely to be aware of the terms of the contract before signing the documents, the banks are not doing unethically and they are doing ethically.

The banks are not doing unethically and they are doing ethically.

Junaid answered 2 years ago

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