what is courtesy pay for a debit card?
In: Economics
It’s just a bank workaround for overdrafting an account. If the bank offers courtesy pay, they’ll let transactions process even if there’s insufficient funds in the account – up to a limit. So instead of having a transaction decline or a check bounce, your account goes negative.
You still will owe that remaining money to the bank, and they may charge fees for the courtesy pay. So it’s not something to rely on.
Not sure what you’re specifically talking about about, but sounds like something my bank calls “Overdraft coverage”
If so, that’s an optional service you can enable for a checking account that allows debit/ACH/check transactions to be paid out even without having sufficient funds, voluntarily overdrafting your account. Banks often will charge for this, and may still decline transactions if they feel it’s excessively risky.
It’s also called “Overdraft Protection”.
Let’s say you only have $1000 but rent is $1200, this will let you pay your landlord but go negative by $200, you however will be charged a fee to do so (as the bank did give you a mini-loan essentially). The alternative is you cannot go negative but then you can’t pay rent on time.
Banks also used to have a Nonsufficient Funds (NSF) fee, which would not only not let you go $200 negative, but would also charge you a fee for not having enough to make the transaction clear (so a fee for wasting the bank’s time). Most all banks have gotten rid of this fee though.
It‘s tolerated overdraft.
Bank allows your account to temporarily go into the negative for high interest rates.
Compared to actually having overdraft set up with them for a specific amount.
They do that because it is much more beneficial for the bank to go ‚ah well she paid for 10 usd more than she has in her account, we‘ll allow that since we know her wages come in in a couple of days anyway and tack on a bit of interest‘ rather than go ‚no insufficient funds, transaction blocked‘
The latter would either embarrass you at some shop; or have some company drying to do a withdrawal tack on late/processing fees leading to pissed of and annoying customers.
Basically bank expects you to be liquid in general and therefore lets an uncovered transaction go through.
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