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Good To Know: Luca Brasi And Interest Rates

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Sep 29, 2009 10:48 pm US/Central

Good To Know: Luca Brasi And Interest Rates

Reporting
Don Shelby
MINNEAPOLIS (WCCO) ― In this tough economy, a lot of people are buying things with their debit cards they don't have money in the bank to cover. Some banks will loan you the money automatically, without your permission then charge you big-time for the loan. Don says, Congress is getting ready to lower the boom on that practice.

Four the nation's largest banks have said they will scale back on the practice, but Christopher Dodd of the Senate banking committee says that's not good enough.

The practice, banks covering your debit card overdrafts seems benign, downright neighborly. Until you look closely at the fees.

Here's an example: The median debit card overdraft is 20 bucks. The bank charges 27 (dollars) for covering it. If you pay it back in two weeks, your annual percentage interest rate on the short term loan of 20 bucks is 3520 percent.

The average APR according to USA today analysts is around 650 percent. Jokingly, I asked an expert today whether it wouldn't be better to hit up Luca Brasi, the loan shark. She didn't laugh.

She said she studied that and found the Mafia charges a lower interest rate than some of these banks.

(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)

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