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Same as Cash?




Before about a decade ago, I paid rent, insurance, and doctor's bills by writing checks and sending them through the mail. My wife paid by check at the grocery store. I had a credit card for traveling and large purchases, but used cash as much as possible.

As everything became more expensive, instead of carrying a thicker wad of cash I got in the habit of paying for gasoline, parking, and grocery shopping with my credit card, and tried to send an equal amount to the bank every month to avoid the interest. It was all too easy, though, to let the balance creep ever higher.

Now, I still buy lunch and other small purchases with cash, but I prefer my debit card for gas, parking and groceries. My debit doesn't work in the MTA machines, so I use credit there. Every night I enter my receipts into GNUCash, a free linux or windows checking program, and every month I reconcile the software balance with the statement balance.


I also pay my mortgage, insurance, utilities - just about anything I can - as electronic payments from my debit account. I can specify the date of payment and not worry about labeling and stamping an envelope that may arrive late or even be lost. We only write about two or three checks a month. We avoid overdrafts and late fees. We have convenience and we're staying within our income.

Someone at the office said that Bank of America (BOA) was to start charging debit card fees yesterday, and I was complaining to my wife about it last night. So I looked it up this morning, and found that such a challenge to convenience is big, big news and everyone has an opinion. The New York Times had a long article, Banks to Make Customers Pay Fee for Using Debit Cards:

Bank of America, the nation’s biggest bank, said on Thursday that it planned to start charging customers a $5 monthly fee when they used their debit cards for purchases.

The Times noted that other banks are also implementing or considering such fees, but did not mention that BOA will only charge these debit fees to their basic checking customers - who are probably their lower-income customers. We have direct deposit so we will be exempt, for now, but BOA is planning many other fees:

[BOA] has introduced an online-only account that charges customers for doing business at a local branch. It also plans to apply its new debit card fees to anyone who uses the card to make recurring payments like gym fees or cable bills.

Those are exactly the sort of bills I pay now, so that does look like a loss of convenience.

Citibank is one of the few that said it would not introduce a charge for debit card use. “We have talked to customers and they have made it abundantly clear that ‘if you charge me to use my debit card, I would find that very irritating,’ ” said Stephen Troutner, head of Citi’s banking products.

In, BofA's New $5 Debit Card Fee? Blame Dodd-Frank, Forbes saw it as a chance to slam the legislation:

Now, I’m no financial-regulations hater but nothing about the Durbin Amendment is good news for the consumers Dodd-Frank was trying to protect.  I’d be singing a different tune if Senator Dick Durbin pushed for the cap on swipe fees for the sake of consumers  but let’s face it – the Durbin amendment benefits no one except for retailers. It is completely infuriating (and probably shouldn’t be surprising) that one of the few rules to go into effect from the Dodd-Frank Wall Street Reform and Consumer Protection Act has nothing to do with protecting consumers.

In, Did Congress Kill the Debit Card?, the Atlantic says that we aren't actually paying more, we're just paying it to the bank instead of in higher retail costs, but that it will probably kill the debit card anyway:

... one angry Bank of America customer, ... feels the bank is "gouging" her. That's not quite right: she paid this fee before -- she just didn't know it. It was incorporated into the prices of the goods and services that she purchased with her debit card. The fee was then paid to banks by the retailer where she shopped. Now Bank of America is just cutting out the middle man to collect a portion of the fees. This move isn't meant to create new revenue for the bank, but to replace the revenue that Congress forbid them to collect through their old fee policies.

[But] ... retailers aren't cutting prices. Instead, they're pocketing the $7 billion or so they'll save in fees. While this could theoretically change in the future, they have indicated that they aren't cutting prices at this time.

So customers will end up paying more than they did before once this new law goes into effect, but not because the banks are creating a "new" fee, but because the government forbid them to make full use of their old one. This financial regulation effort will amount to a gift to retailers, courtesy of Congress.

I see paying for everything with debit cards as analogous to driving everywhere with personal automobiles. As long as the true costs were invisible, or acceptable, to consumers both were an irresistible convenience that encouraged shopping and consumption of all kinds, and everybody was happy. As the costs rise, people have to cut back according to their income level, and accusations fly.

I doubt that well-to-do customers will stop using debit cards, but I do think that those on the edge of solvency will be forced to reconsider buying everything they see with a swipe. Credit cards are just as convenient, but the working poor can't always get them, and since the 2008 crash, it seems clear that middle class people are wary of large credit balances.

It may be that the Durbin legislation is only a gift to upper class retailers as the middle class move to credit unions to get free checking, and curtail their impulse buying even more. The rest of us will have to adapt and move on.

Bank of America is one of the worst around in my opinion, they are the AT&T of banking, always looking for a way to up your fees and charges. Considering the fees some banks charge for small savers, you are far better off putting your money in a sock. Look around for the best deal, CitiBank says they will not charge for use of debit cards.

 

I have a debit card that nobody turns down. I have my tiny account with Wells Fargo.

On my trip to NY and back it worked just fine and dandy and the only extra charge on my account was one dollar when I filled my son's gas tank!

Except for that dollar I have been charged nothing. This is really great for poor people.

I don't know what they do at other banks these days.

Normally I write a check for rent and a check for my internet--since the local office is six blocks from here.

I use the debit card only at the grocery store.

I listened to a committee hearing on CSPAN and this repub bastard was arguing with the retailer.

"If you are so damned mad about the Visa charges why do you not pass it onto the consumer but offer the consumer a discount for cash or check purchases?"

I heard all this back in the 80's and indeed, back then you could get discounts at gas stations and such if you paid in cash.

What the retailer was attempting to say was that there is a small group of credit card companies who conspire to keep the amounts charged to retailers high.

That is a fact. Fuck the repub bastard but a small cadre of conspirators is just as bad as a straight out monopoly.

Now, I understand it when you tell me that if the retailers are granted relief, you would expect no relief will spill down to the consumer!

I do feel that the credit card industry in this society is in the hands of a few and I cannot believe that is a good thing!

The idea of charging consumers for debit transactions is moronic, and it won't last long. As the Citibank guy said, "We have talked to customers and they have made it abundantly clear that 'if you charge me to use my debit card, I would find that very irritating.'"

The cost of supporting debit card purchases is very low and easily paid for by the $0.24 fee allowed under the Durbin agreement. Basically, the banks were just cranking up the fees for merchants who could not refuse. Having lost this income stream, they think that they can magically transfer it directly to customers.

But customers can and will refuse by paying with cash or credit (or cell phone), so the banks that charge fees will lose the income anyway and possibly the customers to boot. They will rapidly conclude that $0.24 is better than nothing and rescind the fees.

Half the posts I read say the banks are flush with cash, and the other half say BoA is staggering under mountains debt, so I don't know how serious they are. I do get a lot of utility from my debit card, but it seems ridiculous that they have my money at near-zero percent interest and have to charge me more to spend it. The ATM is only five blocks away, so I can limit myself to cash withdrawals if necessary. Or, as you say, have my pay deposited elsewhere.

At risk of sounding like a shill for the Credit Unions let me just say... there's always the Credit Union.  Almost everything a bank can do, a Credit Union can do better. 

And there's always independent banks.  Nobody has to have a checking account or debit card with the "too big to fail" banks.  Why pay those fees when you don't have to?

My wife has had an account with her credit union forever. She loves it, but I have mixed feelings. Last time I checked, they still didn't have online banking, and when we went to them for a house loan, they tried to include that damn mortgage insurance. When we balked at that, they tried the old, "If you don't do it now, you can't apply again for at least a year." routine. We went elsewhere.

We have accounts at two different credit unions, one large and one small.  I do online banking at both of them.  We don't have a mortgage with them, so I don't know about that, but we do have a car loan with one of them with automatic payments.  We have our mortgage at a small bank, mainly because the interest rate was lower, but all our other banking is done at the CUs.  No complaints so far.

When my bank card last required renewal, they automatically made it a debit card. I had it changed back into an-access-to-account card.

The debit card is basically an instant check writing system. The banks either carry the cost of  processing transactions with the hope that having you as a client will lead to other fees or charge you straight up for using their services. 

I prefer using either cash or credit. The credit card makes its money on the client failing to pay it off properly. Less mistakes, less cost.

Cash is cash.

BofA Retreats On Debit Fee, Citing Uproar

Bank of America Corp. has dropped its plan to charge customers $5 a month for making purchases with their debit cards, responding to a customer backlash after the fee was announced in September.

The move is the highest-profile retreat following decisions by several rivals in recent days to drop customer tests of the new fees. SunTrust Banks Inc. and Regions Financial Corp. also said Monday that they will stop charging customers for debit-card transactions. The announcements also follow decisions last week by Wells Fargo & Co. and J.P. Morgan Chase & Co. to drop customer tests of the new fees.

Some pundits are crediting OWS with BOA's retreat on debit fees:

Did Occupiers Just Beat Bank of America?

Are big banks feeling pressure from Occupy Wall Street?
 

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