The Great Debit Card Caper

         Every financial institution in the country seems to be locked in a great land rush to capture real estate in my wallet.  If I maintained all the credit cards that show up in the mail, not to mention all that I have been “pre-approved” for, I’d need to carry a man-purse.  I wasn’t about to carry two NationsBank ATM cards.  And I mean ATM cards.  I am adamant about my ATM cards serving in that capacity only.  If I’d let them, the banks would automatically attached Debit Card capability to my ATM cards. I insist that they provide me a card that only works in ATMs and does not bear a Visa or MasterCard logo.  I remain convinced that Debit cards are the greatest fraud ever perpetrated upon the consumer, and I refuse to participate.  You don’t want to get me started.  Debit cards give me the redass. 

I cannot imagine why anyone would use a debit card rather than a credit card.  In the first, the bank uses your money until you swipe the card, and most of the time, the transfer is virtually immediate. Your money is gone.  In the second, you use the bank’s money, for FREE, until you pay the bill every thirty days.  Banks have positioned debit cards as a more convenient alternative than checks.  Granted, they are more convenient for the consumer and everyone behind her in the grocery line, but they are mostly more convenient for the bank.  With checks, banks must endure the costs to manually handle, enter, record visual imagery, copy, and store.  With debit cards, all this “inconvenience,” along with all its attendant cost, goes away.  Cha-ching!   

Do banks reward the consumer for saving them all this money?  Amazingly, just the opposite.  More and more banks are charging the consumer a transaction fee each time the card is used and the PIN is entered.  In a survey by the New York Public Interest Research Group, 89% of the banks surveyed tack on a point-of-sale fee of anywhere from 10 cents to $1.50 for PIN-based debit transactions. Cha-ching! 

Just as with credit cards, retailers usually pay the bank a fee for the processing of a debit card transaction. Normally, a flat fee of 7.5 cents to 10 cents is paid when the PIN is used and the transaction is processed "online." If the customer signs for the purchase, it’s processed “offline” and the fee can be as much as 2% of the transaction. On a two hundred dollar grocery order, that’s four bucks for the bank. Cha-ching! 

With a credit card, the bank has some exposure.  With a debit card, the bank has little or no exposure; it’s all borne by the consumer.  Does the bank share the benefit of this protection.  Not unless you call overdraft penalties sharing the wealth.  These can be as high as thirty or forty dollars—not to mention the twenty-five percent interest rate the bank collects until the deficit is paid back.  Cha-ching! 

Little wonder the banks love to pass out debit cards.  Granted, credit cards require discipline, which a prudent person exercises with a debit card anyway.  Keep track of what you spend and pay the entire bill every month on time.  Write one check instead of fifty and avoid fees and penalties.  What could be easier?  If you aren’t up to the challenge, go ahead and throw yourself to the bankers.  They saw you coming.

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Bank screw ups