Non-Bank-Linked Cards

• If you try to use a gift debit card for a transaction that exceeds the card balance, the card issuer declines the transaction, but you pay no penalty. Some reloadable card issuers charge a penalty fee if you try to use your card for a transaction in excess of your card balance. This often impacts people who have payroll reloadable cards, because the penalty fee leaves them with a negative balance and the card issuer pays off the negative balance with a portion of the cardholder's next paycheck.
  
  

Bank-Linked Cards

• If you have a debit card linked to a checking account, your bank may have asked you to opt in or opt out of the bank's standard overdraft procedures. If you opted in, you gave the bank discretion to approve or deny over-the-limit charges. You pay a penalty fee regardless of whether the bank approves or declines the transaction. If you opted out, the bank declines any over-the-limit transactions and cannot charge you a penalty fee. Banks can only assess fees if the bank has a signed copy of your opt-in authorization, so if you made no selection, the bank cannot charge you a fee or pay over-the-limit charges.
  
  

Other Charges

• Rules pertaining to debit card fees only apply to one-time transactions, which means your bank still has the discretion to pay or decline charges made to your card to cover recurring payments, such as your utility bill or magazine subscriptions. The bank also can charge you a non-sufficient-funds penalty fee for each over-the-limit recurring debit card charge, even if the bank decides not to honor the transaction. If your account goes into a negative balance, your bank also can charge you an extended overdraft fee if you account remains overdrawn for a week.
  
  

Overdraft

• If you have overdraft protection in place, such as a linked savings account, credit card or credit line, your bank uses money from that account to cover debit card charges if you have no money in your checking account. You do not pay a non-sufficient-funds fee when this happens, but you normally have to pay a funds transfer fee. Additionally, you have to pay interest if the funds used to pay the item are taken from a credit card or credit line. Overdraft protection covers debit card transactions as well as withdrawals from automated teller machines (ATMs).