Debit Cards: Bad news on the horizon

[gooddecisions]

Bad news may be on the horizon for any debit card users. There may be $50 or $100 limits on purchases and additional usage fees. Legislation has limited how banks can make money, so this could be the consequence.

money.cnn.com/2011/03/10/pf/debit_cards_limit/index.htm?hpt=T2

[azphx1972]

Oh well, I never use mine anyway. Credit card all the way for me, paid off in full every month (unless I'm taking advantage of a 0% promo offer).

Edit: I did use my debit card at Sam's Club last month, since they don't take VISA credit cards and I didn't have my Discover Card with me. But I hadn't used my debit card in years prior to that incident.

[dragonfly7]

Thank you for sharing. I've been trying to keep an eye out for fee increases.

[RoadToRiches]

I am glad I don't bank with any of those big banks. Besides, since I went to the "envelope system" life has been so much better. It's funny to see my bank account online now. There is like no activity lol..I take out cash every payday and that's it. Put it in my envelopes and I am good until next pay-day. I love it!

[Cookies Galore]

Mar 10, 2011 17:12:12 GMT -5 azphx1972 said:

Oh well, I never use mine anyway. Credit card all the way for me, paid off in full every month (unless I'm taking advantage of a 0% promo offer).

Edit: I did use my debit card at Sam's Club last month, since they don't take VISA credit cards and I didn't have my Discover Card with me. But I hadn't used my debit card in years prior to that incident.

Congratulations.

[illinicheme]

I can understand why some folks will be upset by this, but it won't have any impact on me. I rarely use my debit card. (Initial car registration at DMV is the only thing that comes to mind in the past couple of years.)

I've never really understood debit cards as a concept. If you're capable of controlling your spending while using a debit card, you should be equally capable of controlling your spending with a credit card - you just have to look in a different place for the list of transactions.

[azphx1972]

Mar 10, 2011 18:14:21 GMT -5 @illinicheme said:

I've never really understood debit cards as a concept. If you're capable of controlling your spending...

I think you just answered your own question.

[Deleted]

I've used my debit card once- at Aldi's, when we spent DH's $250 stimulus check for SS recipients on food for the church food bank. They don't take credit cards. It's going to hurt these merchants. It may even bring back the use of checks, and banks hate checks.

I'm in the process of switching my checking account from B of A, even though they've done just fine for 7 years, to an account at BankDirect which pays a tiny interest rate (half a % per year) and AA miles (100 miles for every $1000 average balance per month). It will be interesting to get out of bricks-and-mortar banking but so far I've been pleased.

[gooddecisions]

"Credit card all the way for me, paid off in full every month (unless I'm taking advantage of a 0% promo offer)."

That is how I handle purchases as well; however, as banks continue to be squeezed, you'll likely see more usage fees with credit cards as well. In fact, I would "bank" on that being the consequence of CARD Act of 2009. I'm not sure how I'll proceed when I can no longer use a credit card for free. I was thinking my plan b would be to start using my debit card, but as you can see- that plan is no good either.

[azphx1972]

Mar 10, 2011 18:24:59 GMT -5 gooddecisions said:

I'm not sure how I'll proceed when I can no longer use a credit card for free. I was thinking my plan b would be to start using my debit card, but as you can see- that plan is no good either.

I guess it'd be time to break out the dusty checkbook then. ;D

[mithrin]

I think the CNN article is missing a big point about debit cards. With most debit cards, the transaction can be run as a debit (with PIN) or as a credit card (if your debit card has the VISA or MC logo). All that a $50/100 cap on debit transactions would do is force the merchants to run the transaction through the credit card function (since the CC interchange fees are not capped). There is no reason for Chase or other banks to limit the purchase amount when using your debit card as a CC, since by using the CC instead of debit interchange, they get around the new 12 cent fee limit. I think in the end, the consumer isn't going to notice much difference (unless they have a debit card without the VISA/MC option). It's the merchants, who stood to benefit from the cap on fees, who are going to have to switch larger transactions to credit and pay the higher processing fees.

I use my debit card at least 15 times each month (to qualify for rewards checking). I avoid using it for purchases over $15 anyway--as I'd rather put lunch on the debit and larger purchases on a cash-back CC. I don't really expect banks to start charging fees to a majority of their customers just to have a debit card. For one thing, they would have to deal with a high percentage of them coming in asking to destroy their debit card and replace it with a simple ATM card instead. Especially seeing as setting a $50 cap on debit card purchases, and having those go through the CC interchange is a much simpler way for them to cut their losses.

[lynnerself]

Wow, Chase is my bank (since the WaMu mess).
We always use the debit card at the grocery store. It won't accept a credit card. And it's always more than $50. I guess like the other poster said, dust off the checkbook and order more checks.
I think there is a real generational thing with debit cards. My DD and DS (23 and 25) barely know how to write a check. The debit card is used for almost all transactions large and small. And as far as I know, they have never overdrafted their accounts. They have credit cards, but are only used online.

[illinicheme]

Mar 10, 2011 18:18:30 GMT -5 azphx1972 said:

Mar 10, 2011 18:14:21 GMT -5 @illinicheme said:

I've never really understood debit cards as a concept. If you're capable of controlling your spending...

I think you just answered your own question.

Except that I still don't get it.

One of the arguments against "swipping plastic" is that folks supposedly spend a bunch more and/or don't think about what they're doing when they swipe a card instead of paying cash. So folks who can't follow through with watching and totaling transactions online should probably pay only cash.

For folks who can manage to watch and total transactions online, there's zero benefit to a debit card. I just don't understand why they ever came into being.

[lynnerself]

In the case of my kids, I would say that the only "concept" is basically ease of use. They don't have to worry about carrying cash or having enough cash on them, it takes a lot less time to swipe a card than write a check and they don't have to worry about forgetting to pay their credit card on time. They keep a buffer amount in the checking account and check their balance on line frequently.

[azphx1972]

Mar 10, 2011 18:49:45 GMT -5 @illinicheme said:

One of the arguments against "swipping plastic" is that folks supposedly spend a bunch more and/or don't think about what they're doing when they swipe a card instead of paying cash. So folks who can't follow through with watching and totaling transactions online should probably pay only cash.

I think debit cards were primarily created for convenience, not to restrain people's spending (although that's an "advantage" that several popular personal finance experts tout as a benefit):

www.brighthub.com/money/personal-finance/articles/42073.aspx

[iono1]

I use my debit card all the time. I pay for purchases of a few hundred dollars like car repairs, when I don't know how much I'll be spending when I bring it in, with my debit card. I also have on line accounts that I purchase stuff with with a debit card on file.
I don't use my credit card very often. I guess if my credit union made changes like a monthly fee, I'd drop the debit card & just pay for the things with my credit card & then pay it off on-line.

[Tiny]

I always assumed transactions under $100 (maybe even under $50) were the bread and butter of Debit Cards... you swipe for your fast food breakfast/coffee or morning snacks at the convenience store, you swipe for your fast food lunch or convenience store food, you swipe for a gas for the car, you swipe for the gallon of milk and the loaf of bread you have to pick up on the way home... I bet nearly 80% of debit card transactions are for less than $50...

I, too, never understood the allure of debit cards - if I have to track every purchase (most of which are $10 and under) in an effort to avoid overdrawing my account -- I'll just use cash... If I'm spending more than $20.00 I'll use my credit card...

[Tiny]

If I read the article correctly - it seemed to imply that the people who would be hurt the most by having their Debit Card rejected for a transaction more than the limit would be the people who didn't have a Credit Card (implying they have 'bad credit'). Bad Credit person wouldn't be able to use their debit card to buy $200 in groceries or fill up the tank on their car...
The thing is... if they have a checking account to which the Debit Card is tied to couldn't they write a check for big ticket purchase? or pay cash (after withdrawing from their accnt)?
OK, I guess I've also read that the "not good with money" people also use Overdraft on their Debit Cards as a way to take a short term high interest loan...

[whoisjohngalt]

I've always been way too lazy to use a debit card, so I don't have one.

On a separate note, I hope all those people who were screaming about big bad banks are not too upset now. They wanted govt involved, they got it

Lena

[Mardi Gras Audrey]

Mar 10, 2011 20:34:15 GMT -5 Tiny said:

The thing is... if they have a checking account to which the Debit Card is tied to couldn't they write a check for big ticket purchase? or pay cash (after withdrawing from their accnt)?

Do most places take checks anymore? I thought that one of the bennies of debit cards was that the merchant knows immediately if they go through (as opposed to the bounced/forged check). If people start whipping out checks and the checks aren't good, won't this cause prices to go up for everyone as the merchants adjust for the risk of not being paid?

Just my little business major take on the use of debit cards vs. checks....

[stats45]

I wouldn't be too worried.

I have an unshakeable faith in the ability of banks to find new and creative fees and an equally unshakeable faith in the ability of bregades of idiots to find themselves trapped in them. For those of us who pay attention to these things, it shouldn't be that bad.

[ZaireinHD]

I am confused?
why cap my spending amount?
I understand that when I swipe my card it costs the retailer $0.44.
But that's for any amount for my total purchase, weather it's $100 or $2,000 - it's costs the retailer $0.44.
I'll read it again before I send the link out in my email dist list.

[ZaireinHD]

Mar 10, 2011 18:32:41 GMT -5 mithrin said:

I think the CNN article is missing a big point about debit cards. With most debit cards, the transaction can be run as a debit (with PIN) or as a credit card (if your debit card has the VISA or MC logo). All that a $50/100 cap on debit transactions would do is force the merchants to run the transaction through the credit card function (since the CC interchange fees are not capped). There is no reason for Chase or other banks to limit the purchase amount when using your debit card as a CC, since by using the CC instead of debit interchange, they get around the new 12 cent fee limit. I think in the end, the consumer isn't going to notice much difference (unless they have a debit card without the VISA/MC option). It's the merchants, who stood to benefit from the cap on fees, who are going to have to switch larger transactions to credit and pay the higher processing fees.

I use my debit card at least 15 times each month (to qualify for rewards checking). I avoid using it for purchases over $15 anyway--as I'd rather put lunch on the debit and larger purchases on a cash-back CC. I don't really expect banks to start charging fees to a majority of their customers just to have a debit card. For one thing, they would have to deal with a high percentage of them coming in asking to destroy their debit card and replace it with a simple ATM card instead. Especially seeing as setting a $50 cap on debit card purchases, and having those go through the CC interchange is a much simpler way for them to cut their losses.

I like this post of getting around the charge - it makes cents to me.

but ...once again I'm surprised at the boards - teaching me another life lesson about how people live.

I use my debt card EVERYDAY!!! at the gas station, grocery store, retail store, everywhere. I don't understand how all of you DON'T use it?

[gooddecisions]

"I don't understand how all of you DON'T use it?"

We get better rewards with our credit card, an interest free 30 day loan, additional protection against theft since a stolen credit card won't lead to an empty bank account, and keep our bank statement clean.

My credit card has a bunch of other benefits like reimbursement for lost luggage, faulty merchandise, car rental insurance, etc. I love my credit card. It's really amazing that it offers so much and doesn't cost me a thing.

ETA- for now anyway...

[ZaireinHD]

Mar 10, 2011 21:12:22 GMT -5 Mardi Gras Audrey said:

Do most places take checks anymore? I thought that one of the bennies of debit cards was that the merchant knows immediately if they go through (as opposed to the bounced/forged check). If people start whipping out checks and the checks aren't good, won't this cause prices to go up for everyone as the merchants adjust for the risk of not being paid?

Just my little business major take on the use of debit cards vs. checks....

in my world businesses do take checks. I think you have a point about people writing bad checks but that is also illegal - so doubtful people will do that or get caught and put in jail.
But I heard that cursive hand writing is NOT being taught in schools anymore? so kids to day would not sign a check. (not that it matters I guess if their signature is in cursive or print)
I'm also sure that kids today are NOT taught on how to fill out a check - cause they would pay there bills on-line.

[ZaireinHD]

Mar 10, 2011 22:01:39 GMT -5 gooddecisions said:

"I don't understand how all of you DON'T use it?"

We get better rewards with our credit card, an interest free 30 day loan, additional protection against theft since a stolen credit card won't lead to an empty bank account, and keep our bank statement clean.

My credit card has a bunch of other benefits like reimbursement for lost luggage, faulty merchandise, car rental insurance, etc. I love my credit card. It's really amazing that it offers so much and doesn't cost me a thing.

ETA- for now anyway...

See why I love it here! I just keep learning!
My Credit Card.....I just know is expensive and charges me a higher interest. But my debt card has those protection against fraud and I DON"T get charged any interest - it's like the opposite of you on CC for me on my debt card

I'm gonna call my credit card to see what are the benefits??

[gooddecisions]

"I'm also sure that kids today are NOT taught on how to fill out a check - cause they would pay there bills on-line."

School didn't teach me that either. In fact I don't remember anyone "teaching" me that. It's just something you figure out along the way. I stopped writing checks several years ago, but wrote one the other day. I rarely write anything anymore and decided to just use print, but still signed my name.

"I hate learning cursive and I hate all of you! I'm never going back to school, NEVER!"

[gooddecisions]

"But my debt card has those protection against fraud"

That's true, but if you think you're going to get that money back in your bank account immediately- you got another thing coming and meanwhile your bills are waiting. If my primary credit card gets stolen or lost, I call my credit card company, report it, and whip out my secondary "emergency" card and keep on going. Many credit cards are free (for now) if you don't carry a balance, which is what we die hard credit card users avoid.

[ZaireinHD]

yea I'm NOT going back to college. It's a waste of time. Especially since I've seen so many people hired for WHO they know and NOT WHAT they know.
no I wasn't taught in school on how to fill out a check - I think my parents? or at the bank when I opened my first checking account showed me? but cursive to sign anything I guess in not as important as it used to be. I think it's pretty much just a cover your ass move when fraud hits?

[ZaireinHD]

Bank - is this your signature sir?
me: uagh...no it's not?
Bank -well it looks like it is from the 5 previous signatures we have on file
me: pfft oh...well then maybe it is? I really can't tell cause it's so messy looking....