Many banks have software systems designed to throw you into overdraft so they can score big on fees. Here's how it works: Let's say you have a debit card. You use it and your transaction is approved even if you don't actually have the money in your account. That's when you'll get hit with an overdraft fee -- even though the transaction goes through!

PIRG now reports that half of all overdraft fees come from debit cards in this way. But there is a solution. You can tell your bank to remove the overdraw authorization on your account. Clark recommends you go in person and fill out the necessary paperwork.

Yes, you'll have the embarrassment of having your card rejected at the coffee shop if you don't have money in your account. But it is better that you should have to dig through your pockets for cash than pay a hefty fee later and get the transaction approved up-front.

Clark thinks its a rotten game that credit card companies play: They lure you in, get you drunk on plastic with low interest rates, and then once they see you've got a big balance going, they say, "We were just kidding! Your interest rate is now 17%!" Clark has even seen it go as high as 39%. Under current federal regulations, a bank is allowed to raise your interest rates on previous purchases with only 15 days notice. There's been so much uproar about it around the country, that after great delay and much legislation, the Fed and other agencies have issued some proposed rules for the credit card industry. Instead of 15 days notice, you'd get 45. Another new rule is that a bank would be free to raise interest rates on future purchases, but on any balances that already exist, the interest rate you purchased under would apply. The banks are going crazy, because these rules would destroy their ability to cheat you. But that's what Clark thinks the banks are doing, which is nothing short of slimy. When the Fed issued these regulations, they got over 60,000 comments from bank lobbyists--usually they only get a couple hundred at most. The head of the Office of the Controller of Currency even took it upon himself to plead the case for the banks. Clark really wishes he could get him to come on the show so Clark can ask him why he wants to stab the American peope in the back. One of the arguments the Controller makes is that by issuing these rules, there might be less credit made available to the people. Clark says: "As if the American people need more credit!" Spending money we don't have is how we've made our position weaker in the world. If banks can't lend money to people because they can't rip off the customers in the end... so what? That said, it's a free market. If someone says they want to lend money at 35%, that's their right. But if they promise a 7% rate, they shouldn't be able to raise it after the fact. This whole issue has Clark really steamed.

Have you ever used your credit card and been asked for ID or told you'd have to make a minimum purchase? Both stipulations are against the merchant guidelines that govern Visa and MasterCard.

Clark is not upset when he's asked for ID; he sees it as another safeguard, even if it is against the guidelines. However, there is some recourse available if you are peeved.

MasterCard has a simple-to-use form where you can alert them if a merchant required ID or a minimum purchase. Clark has no idea what becomes of this info once you submit it to MasterCard.

Visa, on other hand, has no such procedure in place. So they have a rule, but no enforcement.

The underlying issue here is that we're still using '60-era magnetic strip technology for credit cards. Europe and Asia, meanwhile, are years ahead of us with their smart chip technology. With the smart chip, you're required to enter a secret code to use your credit card. But the banks that issue cards don't want to spend the money to have a safe system on our shores!

Do you recall the T.J. Maxx security breach a couple of years ago? It turns out that was not an isolated occurrence, but part of a long-running criminal conspiracy. It recently became big news again when some of the ringleaders were busted.

These particular criminals would sit in store parking lots and try to hack into credit card processing machines -- and then into mainframes -- to get credit card and debit card numbers.

Unfortunately, there's nothing we as consumers can do to prevent these security breaches. But if you handle them right after being affected, it shouldn't cost you any money.

The solution is simple: Read your bank and credit card statements line item by line item when you get them. With credit cards, you must pursue any discrepancies within 60 days or your forfeit your right to the money.

The real problem is posed by petty thefts that might otherwise fly under the radar on your statement.

College kids are bombarded with an average of 4 phone calls and 5 mailings every month to get them hooked on credit cards, according to a new PIRG study. There's a feeding frenzy because teens are the most profitable of all customers for the banks that issue credit cards. It's unreal to Clark that university presidents and alumni groups are co-conspirators with the banks in trying to demolish the credit standing of our youth. Some cash-hungry universities even make deals with banks to provide them with personal student information and on-campus access to students.

The consequences of this are severe. Clark's senior producer, Kim, ran up $17K of lifestyle debt at college by the time she was 24. She didn't get it all paid off until she was 31. Meanwhile, Citibank and other lenders are being sued in the state of Ohio for handing out coupons for free sandwiches to students. But the catch was students had to apply for a credit card before the coupons could be redeemed. You as a parent have to guide your teens and teach them about the dangers of debt. This should not be a onetime talk; it needs to be an ongoing educational process. Get your own finances in order so you can teach by example.

Many of us have what are called -- in credit card lingo -- "back of the wallets." These are the cards we hardly ever use that may be buried somewhere in our wallets or in a drawer at home.

The typical American has about a dozen cards, but only 2 that are used frequently. The rest of those cards are ignored until they go dormant. In fact, you may not even activate the new card when you get it in the mail.

Banks used to just let these dormant accounts sit and hope you'd someday use the card again -- but not anymore. Now if an account goes stale, they'll close that account. That hurts your credit score and limits your access to funds.

So you may want to consider using your "back of the wallets" twice a year about 6 months apart. Charge a nominal amount and then pay it off. That will keep these accounts current in your credit mix and raise your credit score.

This is not just a silly assignment. You'll be helping your score, which is very important in getting lower interest rates, securing job offers and more.

The nation's banks are reaching new lows when it comes to customer no service. The latest wrinkle took Clark by surprise because he's received scattered calls about this issue without realizing there was a pattern emerging.

Now The Wall Street Journal has discovered that banks are arbitrarily reducing credit limits without telling you. The first you'll hear about it is when your purchase is denied!

Some banks are having up to a 10% default rate on the cards they issue. That's a huge number compared to historical averages. Their panic is so great that they're indiscriminately reducing credit limits -- even sometimes for those who pay their bills in full every month.

The Wall Street Journal also reports that banks are taking a zip code approach to reducing credit limits. This is especially true throughout the real-estate bubble states -- California, Arizona, Nevada or Florida. Again, the banks are frightened because they've seen people go from being current on their bills to declaring bankruptcy practically overnight.

Meanwhile, the banks are also targeting the self-employed because they're frightened of small business bankruptcies. Clark read about one person who had an American Express card that got cut from a credit limit of $36,000 to $4,300!

So if you fit into any of these categories, make sure you're not dependent on any one bank or one credit card. You should have multiple lines from multiple banks. But beware if you miss a payment or are late. Then you've really got a bull's-eye on your back.

The Federal Reserve is proposing new guidelines for the credit card industry. These are simply proposed regulations; they haven't been finalized yet and may not be until after the November elections. The banks, predictably, are going berserk trying to push back on these proposals.

Here are some highlights of what's being considered:

• Banks would be required to give you a minimum of 21 days to pay a bill. That means statements would have to go out in a timely manner. Banks could no longer pull that funny business of sending out your statement a day or so before it's due.

• Credit card companies would no longer be allowed to raise rates on existing balances.

• Holds would no longer count toward your limit. This tactic is frequently used to force you over your limit. Holds are placed on your account when you use your card at a hotel, car rental counter or gas pump.

• Double-cycle billing -- often used to charge interest on a statement that's already been paid in full -- will be banned.

Keep in mind that these are only proposals. The aim is to make it look like there's a cop on the beat during an election year. These may be changed completely before they become the law of the land.

One thing is certain -- you can expect an uphill battle! Here's an example of the mentality coming from the banks: Capital One was recently investigated by California's state attorney general for its practices concerning customers. The company decided to change its registration from a state bank to a national one during the inquiry. That exempted them from the attorney general's scrutiny and allowed them to turn around and file a counter suit!

So what's the takeaway for you? Seize the power by not carrying a revolving balance on your credit card. Stop accumulating lifestyle debt and the banks will have no power over you.

Several months ago, Clark made a lot of listeners unhappy when he failed to bash Bank of America for charging non-customers a $3 fee for use of their ATMs. Clark defended BoA's right as a free-market enterprise to raise their rates, and he reasoned that non-customers would stop using their ATMs because of the added surcharge. But that's not what happened. In fact, Dow Jones now reports that other banks are following BoA's lead and raising their rates.

We are the ones who have to change our behavior -- not BoA or any of its competitors. They can only rip you off if you allow them to do so. Most every bank and credit union has a network of ATMs you can use for free. You can also shop around for the lowest surcharge before you do a non-customer ATM transaction. BoA and others are raising rates because we're willing to pay! If this sounds like you, your assignment is to go to the website of your bank, credit union or brokerage house and find out where their free ATMs are located. Another option is to use your debit card during a point-of-sale purchase to get cash back for free. If you don't change your behavior, today's $3 rip-off may be $5 or $10 next year!

Clark has taken about 8 calls over the last several months that he thought were UFO questions with no connection to each other. People have been telling Clark they're getting harassed by collectors over debts that were wiped away when they filed for bankruptcy, or that debts that had been thrown out in bankruptcy court are showing up on credit reports as outstanding. Then Clark read Business Week's recent cover story "Prisoners of Debt" and it all made sense: Certain banks, collection agencies and credit bureaus are working together to undermine existing bankruptcy laws. When you file for Chapter 7, you get a bad mark on your record for 10 years. The tradeoff is that you also get to wipe out any credit card debts clean and clear. You usually first go through an evaluation process to see if you should pay a portion of your debts back under Chapter 13. Today you can only do Chapter 7 if your situation is hopeless.

Business Week discovered that Capital One, Bank of America, Chase and Discover are ignoring these bankruptcy laws -- by accident or on purpose -- and illegally selling debts to collection agencies so they can go after you. This flouts the law of the land, whether you agree with it or not. When a Chase lawyer was questioned by a judge about why they've sold bankrupt debts, the lawyer replied that it happens all the time. The Business Week article says the banks claim this is all an unintentional mistake. But there's a clear pattern here: First the lenders fail to wipe out the debt when you file for bankruptcy. Then they sell it off to collectors and score some cash. Next the collectors try to illegally collect the money. Finally, the credit bureaus act as co-conspirators by listing debts on your report that aren't valid. So if you've filed for bankruptcy and are caught in this vicious circle, contact the banks and bureaus by phone and in writing. Try getting them to update the status of your legally expired debts. If that doesn't work, go back to the bankruptcy court where you filed and talk to the judge.

Sometimes it seems like young people have a huge bull's eye on their backs for the banks. People who are between the ages of 18 and 24 are being killed with bank overdraft fees. The latest stats say they're paying more than one billion dollars in overdraft fees every year. Clark recently heard from someone who has a teen that overdrew a debit account by $15 and that generated $80 in fees. As a parent, it's getting more and more difficult to teach the young about money. But it must be done. When Clark was in school, you paid for things with cash. Today there's no equivalent in a credit-crazy world. While cash is finite, plastic is infinite. A parent's most important lesson to a son or daughter should involve a pen and a check register -- showing them how to take debit transactions seriously. Banks are only too happy to approve transactions that will result in overdrawn accounts and high fees.

There's a bill in Congress that's trying to make it so that a bank must contact you for approval before they overdraw your account. The banks, predictably, are incensed about this because they may lose profit. Clark loves it when people have more info to make smart (or dumb) choices. What happened to ethics and morality in the banking world? Why do bankers get up in the morning and try to figure out how to rip off fellow Americans? If a bank approves an overdrawn transaction that generates fees, how is that moral or ethical?? It's not. The bill will probably be killed because the bankers are so strong giving dirty money to politicians. So teach your children well and you'll save them from losing money in the school of hard knocks.

Clark despises debit cards -- or what he calls "piece of trash fake Visa and fake Mastercards." The banks love debit cards because they make huge profits on them. Most of us have had the experience of making a purchase with a debit card and being asked if we want to do it as debit or credit. If you go for credit, the merchant will pay $1.50 in processing fees. If you opt for debit, the merchant may only pay 17 or 18 cents. So the merchants are always battling with the banks over the use of these cards. Sometimes the banks will even assess you a fee when you select the debit option for a purchase. Meanwhile, the September issue of Consumer Reports' Money Adviser states that your account is 17 times more likely to be hijacked if you go the credit route versus the debit option. But the debit option has other dangers. Certain banks now allow customers to use it to cover purchases that exceed their balance. The banks are all too happy to collect interest of around 1,000 percent on overdraft charges. So ultimately, it's your responsibility to not overdraw your account. Clark advises people to deduct your debit purchase from your account ledger right after making that purchase. It may be a hassle, but it will save you in the long run.

There are a few scenarios where consumers really have to be aware about the dangers of using of debit cards. These include paying for gas at the pump, paying your hotel bill during check-out and doing a car rental. If you use a debit card in any of these situations, you have to know that the bank will put a hold on your account for an amount that exceeds the total of the bill. So though you may only get $10 of gas, the bank may hold $100 -- and if you don't have a lot in your account, you may start bouncing checks. Also, when you use a debit card to pay for something now that you'll get later, you have no recourse if the merchant goes bust or your purchase never arrives in the mail. However you can dispute the charge if you use a credit card. The only time Clark thinks it might be advisable to use a debit card is if you're someone who has been in trouble with credit cards in the past and you habitually go into debt using them. Then the benefits may outweigh the risks.

We are defaulting on our home equity loans more than ever, while simultaneously defaulting less on our credit cards. What's wrong with this picture? Credit card collectors are so aggressive that even if you're one minute late, they're all over you like a cheap suit. They know there's nothing they can really do to you, so instead they use bully psychology to force you into paying up. Contrast that approach with the one taken by your mortgage lender. If you're late on your home payment, they're very non-confrontational. Why? Because they can actually take your house away!!

Human nature dictates that people will pay the person who screams the loudest. But that's the wrong approach. Instead, try thinking about your finances like you would a triage room at a hospital: the doctor sees who has a life-threatening sickness and immediately treats that person. Similarly, it's important to prioritize your monthly bills. Your mortgage should always come first, followed by your transportation bill or car loan -- so you can get to work and keep earning! Try dropping your credit card debt lower on your list of monthly payments. People immediately say, "Well, I'll ruin my credit if I do that." But if you don't have enough money to pay your mortgage, chances are your credit is already being messed up. On a related note, many folks think you can just tell a credit-card collection agency not to call you. Unfortunately there's a special loophole in the Fair Debt Collection Practices Act that the banks got written in. It states that if the collector is an employee of the bank, he or she is exempt from many of the regulations. So they can continue to hound you day and night. If you're getting threatening phone calls where collectors are cussing you out, try taping it. Then bring the tape to your nearest TV station and they'll be more than happy to put the bank on the hot seat.

The Wall Street Journal isn't usually known for protecting the consumer. Yet the paper recently ran an article explaining how dangerous the use of debit cards can be for the average person. That's no secret around here at Clarkhoward.com, where Clark routinely refers to debit cards as a "piece of trash fake Visa or fake Mastercard." Sure it looks like a credit card, and it works similarly to one, but it can really foul you up in ways that a traditional credit card can not.

Say for example you buy a knife set that's being advertised on TV. If you pay for it with your debit card and it never arrives in the mail, you have no recourse. Had you paid with your credit card, all you have to do is dispute the charge. The same pitfalls can occur anytime you use your credit card to pay for something now that you'll be receiving later, such as airline tickets, cruises reservations and more. Other areas of danger with debit cards include the difficulty of refuting charges if your card is stolen, and the practice of hotels and some car-rental agencies that put a large hold on your account in advance of a transaction. Did you know that the latter practice can cause you to bounce checks even though the money is there in your account? The bottom line is that Clark believes the same protections enjoyed by credit-card users should be afforded to debit-card users. But the banks are making a fortune off debit cards, so there's no real incentive for them to change their ways. As Clark says, it used be that bank robbery involved a thief going to a bank and saying "Stick 'em up!" But today it's you that's getting robbed by the bank when you use a debit card.

Did you know that if a criminal gets your credit card number, they can show their "generosity" by donating money to charity using your credit card? Why are criminals doing this? This is happening because the charities will let the criminal know if the card is verified and still active. More importantly, it's a great way for criminals to test if the card will be reported stolen, according to a story Clark read in Newsday. Criminals can then sell your verified card number for three times the value of an unverified card! If someone steals an unverified number, it's worth $6; if it is verified, it sells for $18. The Red Cross has reported 700 fraudulent donations using stolen cards last month alone! Therefore, if you see a small unauthorized charity donation on your bill, be alert. Clark says the solution to this problem is so easy. The credit card companies should do what is done in Europe by inserting a smart chip in the card which requires a secret code. So even if someone steals your card, if they don’t know your code the card can’t be used. The result in Europe is that credit card fraud is nowhere near the problem it is in the United States. So why are we still using '60s technology to print out credit cards here? It seems like the banks would rather deal with the fraud that occurs and then clean up the mess after the fact, rather than spend the money proactively to get things done right in the first place.

When you visit a retail store these days, you probably didn’t notice the war going on behind the scenes. Banks and retailers are going at it over debit cards, and we – the customers – are the pawns in the game. Basically, banks are trying to get people to use their debit card like a credit card because they make more money when you do it that way. Banks are offering all kinds of rewards and trips if you’ll sign for a charge instead of entering your pin when you make a purchase. Banks get just pennies when people enter their pin number. In turn, retailers are livid and are doing all kinds of things to get you to punch in your PIN. According to the Wall Street Journal, retailers are reprogramming their registers so the code option automatically pops up and customers are more inclined to do it that way. So, what’s it all mean to you? Eventually, banks will get more of your money if you swipe your card like a credit card. Merchants will start charging more money for items to make up for their cost, and customers will suffer for it. If you use a debit card and you’re being asked to punch in a code, it will help you in the long run. You can ask to use your card as a credit card; that is your option. But it may end up hurting you more in the system. Clark hopes the whole system breaks up and debit cards become a thing of the past. We’ll keep you posted.

You probably know that Clark is not a fan of debit cards. He carries an ATM card and a couple credit cards, and that’s it. Other consumers are getting wise to the risks of debit cards and they’re not applying for them as often. Banks realize this and have started offering you money or prizes if you get a debit. The Dow Jones News Wires report that by the end of the year the 10 largest financial houses are all going to offer some kind of prize if you carry and use their debit cards. Clark likes to refer to them as fake Visa or Master Cards. These cards are potentially dangerous because you have no dispute rights or chargeback rights when you make a purchase or when someone steals your information. There are a few exceptions to that rule. If you are not able to control yourself when you have a credit card, or you typically write checks, it’s a good idea. There is even more risk to you using checks. Also, giving a teenager a debit card is better than giving him or her a credit card. Teens tend to rack up charges on credit cards because they don’t usually pay the bill. A debit card or stored value card allows you to set a limit on what they spend.

In spite of Clark’s warnings about “fake Visa or MasterCards” – also known as debit cards – members of his staff carry the cards and have for awhile. Kim, one of Clark’s producers, has never had a problem – until this weekend. Someone got a hold of her card and her PIN this weekend by using a skimmer and possibly a video camera or binoculars. Now she’s trying to figure out how it happened. She found out when she tried to use the card and it was rejected. If you have one of these cards, make sure you shield your hand when you’re entering your PIN. If a crook gets a hold of it, your information is usually sold on the Internet and funds are deducted all over the world. She hopes to have her money back in her account tomorrow morning, but she’s not going to count on it until it’s there. We’ll let you know what happens.

A reporter from the Detroit Free Press recently wrote about someone stealing his identity after raiding his mailbox. The criminal used the credit card company checks that are sent in the mail and trigger cash advances. If they’re stolen and passed by someone, the first you know of it is when it appears on your credit card statement. The thieves used the checks to steal $7,000 on his Chase credit cards. The reporter’s neighbor, who had a Citibank card, also had money stolen to the tune of $32,000. Both men now have to do affidavits of fraud. Eventually, the transactions will be reversed and no money will leave their hands. That is the good news. Because these are credit cards, nothing will happen if they dispute it in time. Contrast that story with one about PayPal, and the troubles it has had with duplicated withdrawals. PayPal is inadvertently deducting charges twice and sometimes more often when people use a debit card. In one case, it happened more than 20 times. It’s okay to use a debit card for small every day transactions, but never use one for major purchases.

Visa’s check card is supposed to help elminate debt by drafting money directly and immediately from your account that has money. But there are some problems with the cards. First, criminals can empty your checking account if they get their hands on your card. Who pays the bounced checks charges if your check card has been stolen? YOU DO! Also, on a real credit card, if you order something you have the right to dispute the charge if something happens to your order. Until now, you could not dispute an order problem on your check card. Visa is now offering modified dispute rights for check card customers. If you have a check card, look on the back and see if it says ‘enterlink’. If your card does say this, then you might be covered under Visa’s new policy. Make sure you check with your bank to see if you are covered before you begin ordering on your check card.

Clark has a special warning for people who carry fake Visa cards. There has been a breach of security at one of the big national merchants. No one is saying which merchant it is, but an employee has evidently obtained the records of an untold number of customers. That person is using people’s debit card numbers across the country without their knowledge. So, when people try to use their cards, they are being turned away. We need full disclosure by the banking industry about this and anytime it happens. We need to know how many people are affected and what institution is involved. So, for the next seven days, if you carry a fake Visa card, check your account for unauthorized debits. Criminals are striking fast before people realize what’s going on. Why is this so important? If someone gets a hold of your fake Visa numbers and charges up your account, that money is gone. You have to fight to get that money back, and banks decide on an individual basis. Also,Visa offers no protection for you if it causes checks to bounce. It’s a disgrace, but right now, banks are free to decide whether they want to help you out or not.

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In other banking news, you may have heard Clark talk about the computers – and personal information – stolen from Wells Fargo recently. To give you an update, Wells Fargo still will not disclose how many people were affected. But, if you got a letter and the offer of free credit monitoring for a year, the company is not going to automatically charge you after 12 months. So, don’t worry. Use the free monitoring for a year with no obligation. Both banks should come clean about what's really going on though.

If you enter a supermarket or convenience store and use your ATM or fake debit card to buy something, you may have opted to get cash back. It’s easier than going to your bank’s ATM on a separate trip to get cash, and many people are figuring that out. But banks don’t like it one bit because they don’t make any money off you when you do this. So, some of the nation’s largest banks are starting to charge junk fees when you use your debit card and punch in your secret code, according to Dow Jones. One in five banks are doing it, and most haven’t even disclosed it to customers. The Federal Reserve has launched an investigation into this, which will probably result in banks having to tell customers what they are doing. So, why would banks not tell you? The banks lost a class action lawsuit last year regarding the violation of anti-trust laws. Banks were forcing merchants to pay them giant fees each time a customer used fake debit cards. The banks were sued and lost. So, they’re scrambling to take either your money or the merchant’s money in any way they can. About 20 percent of banks are charging the fees these days. If you find out your is one of them, ditch it immediately and shop around for another bank.

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In other banking news, you may have heard of stored value cards. The popular artist, Usher, has his own stored value card, for example. These cards are being pushed on consumers at concerts and stores, and they’re touted as offering great deals. But they also come with massive fees for certain transactions. Read up on them before you get one of these cards.