The Next Bank Heist: DEBIT CARDS
W.B. Yeats
"People still pull out the plastic, but often they're not charging
anything. That leaves banks scrambling to make up the revenue they've
lost from their more-profitable credit cards."
By BusinessWeek
Raquel Garcia is serious about avoiding debt. The 18-year-old customer-
service representative for U-Haul recently canceled her credit card.
Now she gets her entire paycheck deposited onto a prepaid debit card,
which she uses for all her purchases.
Because she can access only what's in the account, Garcia no longer
worries about breaking her budget. "I'm spending just what I need,"
she says.
For consumers reeling from a series of economic body blows, debit
cards are increasingly becoming the plastic of choice.
Some use the cards, which pull money directly from a bank or other
account, as a budgeting tool to limit spending. Others embrace them
out of necessity as banks clamp down on credit.
All told, debit purchases are expected to climb 13% in 2008, to $1.2
trillion, according to The Nilson Report, an industry newsletter --
compared with a 3% rise, to $1.9 trillion, for credit card
transactions. At Visa, the No. 1 card company, debit spending could
surpass credit this year.
* Build credit without a credit card
For the banks issuing the debit cards, the trend seems bittersweet. On
the plus side, debit cards don't pose a threat to the banks' books
like credit card accounts do (credit card losses are mounting as
borrowers fall behind on payments). But the profits on debit cards
aren't as plump because banks don't collect interest on them.
Issuers largely make money from debit card fees, which pale next to
those on credit cards. Retailers, for instance, fork over 1.6% of
credit purchases to banks, three times the amount on debit
transactions.
But don't shed a tear for the banks just yet. Time and again they've
shown an uncanny ability to adapt to a new profit landscape, and the
debit card business appears no different.
Consider the evolution of overdraft fees. It used to be that banks
denied debit purchases when consumers didn't have enough money in
their accounts. Now 14 of the 15 largest banks approve transactions
but hit customers with a fee if they exceed the funds. It's not unlike
getting charged for bouncing a check. A recent study by Bankrate.com
found that overdraft fees now approach $29, up 3% in the past year.
Those penalties are easier to trigger, too. In the past customers had
up to a couple of days -- the time it takes for some debit
transactions to clear -- to deposit cash. But now many banks hit them
with fees as soon as purchases are made.
"Banks have turned to this as a major source of revenue," says Jean
Ann Fox, the director of financial services for advocacy group
Consumer Federation of America.
* The next frontier
Regulatory headwinds haven't deterred the banks from ramping up their
debit card businesses. Among the groups that offer the biggest
potential for banks: people who earn more than $75,000 a year.
According to MasterCard, they're the least active debit card users,
usually turning instead to credit cards that offer frequent-flier
miles and other rewards.
To attract that crowd, financial firms are ramping up their loyalty
programs. MasterCard's Savings program, launched in October, offers
debit users discounts on luxury brands such as Armani and 7 For All
Mankind as well as at retailers such as Home Depot and Target. San
Antonio's Frost Bank recently released its Momentum card, which is
connected to customers' checking or savings accounts. The bank pays
customers a higher interest rate on the accounts -- up to 3.5% -- when
they make more debit purchases.
* The hottest new customer perks
There's also a land grab for the so-called underbanked, the roughly 80
million people who don't have bank or credit card accounts. Dallas'
Comerica Bank won the right this year to issue debit cards to the
estimated 4 million Social Security recipients who don't have bank
accounts. The government deposits the money onto a prepaid card.
(Comerica doesn't charge overdraft fees on them.) Visa and MasterCard
offer prepaid debit cards that companies use to pay employees.
The aggressive push is paying off. These days, debit cards are as
widespread as credit cards. At the upscale suburban Atlanta restaurant
Aqua Blue, waitresses now bring diners a device that lets them swipe
their debit card and enter their password to pay for meals.
"Debit is becoming the payment card of choice for the American
public," says Red Gillen of consulting company Celent.
But for consumers like Garcia who want to break free from the high
fees and penalties of credit cards, debit cards may not be the panacea
they expected. Says consumer advocate Fox: "As with credit cards,
consumers can't keep up with what the rules are."
[This article was reported and written by Christopher Palmeri and
Brian Burnsed for BusinessWeek.]
[Published Dec. 2, 2008]
AllEmailDeletedImmediately
"W.B. Yeats" <slipu...@yahoo.com> wrote in message
news:5911c054-0686-413f...@j35g2000yqh.googlegroups.com...
> "Will debit cards outstrip credit?"
>
>
> "People still pull out the plastic, but often they're not charging
> anything. That leaves banks scrambling to make up the revenue they've
> lost from their more-profitable credit cards."
>
> By BusinessWeek
what's coming is a fee that both the merchant and debit card user will have
to pay. after cash is illegal, of course.
BigDog1
wrote:
> "W.B. Yeats" <slipuva...@yahoo.com> wrote in message
Well I doubt you'd ever see fees on both sides of the transaction.
But I believe there will be a loosening of the merchant account
agreements where minimum purchases for plastic will be required, and/
or the merchant will be permitted to pass the fees directly to the
customer for transactions below a certain limit.
Cash will never be "illegal" in the strict sense. I'm already seeing
some evidence that cash will not be an option in some cases. For
example, over the past few months both my doctor and dentist have
stopped accepting cash for insurance copays. And for my dentist it's
really silly. My copay for a routine visit is only $5. I can't
believe they'd rather pay the transaction fee on that small amount,
than take a $5 bill from me.
Rich Greenberg
BigDog1 <bigd...@gmail.com> wrote:
>Cash will never be "illegal" in the strict sense. I'm already seeing
>some evidence that cash will not be an option in some cases. For
>example, over the past few months both my doctor and dentist have
>stopped accepting cash for insurance copays. And for my dentist it's
>really silly. My copay for a routine visit is only $5. I can't
>believe they'd rather pay the transaction fee on that small amount,
>than take a $5 bill from me.
I suspect that a major factor in the decision not to take cash is to
make the office less of a target for being held up/robbed.
--
Rich Greenberg N Ft Myers, FL, USA richgr atsign panix.com + 1 239 543 1353
Eastern time. N6LRT I speak for myself & my dogs only. VM'er since CP-67
Canines:Val, Red, Shasta & Casey (RIP), Red & Zero, Siberians Owner:Chinook-L
Retired at the beach Asst Owner:Sibernet-L
tween...@mypacks.net
> I suspect that a major factor in the decision not to take cash is to
> make the office less of a target for being held up/robbed.
It also saves thenm the time and effort to write out a receipt for
cash. I collect money for an organization and always encourage
checks. It's proof for both of us.
As to using credit cards, I'll still use mine whenever possible to
get that reward credit. My debit card pays zilch.
BigDog1
> On Dec 4, 12:48 pm, ric...@panix.com (Rich Greenberg) wrote:
>
> > I suspect that a major factor in the decision not to take cash is to
> > make the office less of a target for being held up/robbed.
>
> It also saves thenm the time and effort to write out a receipt for
> cash. I collect money for an organization and always encourage
> checks. It's proof for both of us.
Hadn't thought of that, but it makes sense. The cost the handle my
little $5 bill, or a whole bunch of them, probably far exceeds the
transaction fees. They have to write receipts, account for and
safeguard the cash, then haul it to the bank, or pay for a guard
service to pick it up. Point taken.
As to writing a check, that's off the table. I haven't carried a
check book in over 15 years, since my credit union started offering
ATM/Debit Cards to their customers who know how to keep track of their
money. I write one check every two weeks, to my cleaning lady. And
starting next month she'll have a PayPal account her customers can use
if they wish, so those will gone. I may never have to order checks
again.
> As to using credit cards, I'll still use mine whenever possible to
> get that reward credit. My debit card pays zilch.
Nor does mine. My credit card, offered by my credit union to their
preferred customers, pays no rewards other than: no annual fee, full
30 day grace period from transaction date, and 6.5% on the very rare
occasion that I have to let a balance ride for a while. As
infrequently as I use the card that's more than enough reward for me.
SlightlyHorny
debit cards with $50,000 limits?
BigDog1
> Another bank scandal in its relative infancy ... Can you envision
> debit cards with $50,000 limits?
Nah - it'll never happen. A true debit card is good only for the
balance on hand, plus maybe a small overdraft protection plan with
outrageous fees and interest rates. I don't think even Wells Fargo or
Bank of America, both of which seem to specifically target the low
income low FICO score crowd, would ever come up with a 50K debit card
program.
hal...@aol.com
> > As to using credit cards, �I'll still use mine whenever possible to
> > get that reward credit. �My debit card pays zilch.
>
> each month and I collect points toward air mileage. It also lets me
> avoid the need to carry around as much cash with me, which makes it less
> likely that I will be robbed of my money.
after doing a multi year look at reward cards I decided they arent
worth the bother.
plus a robber has no idea how much money your carrying.
I have heard of people with no cash getting robbed, and beat up
because thewy had no cash
clams_casino
>after doing a multi year look at reward cards I decided they arent
>worth the bother.
>
>
>
Situations differ, but I'm very pleased with the two $200 refund checks
I received from my Chase Freedom card this year - simply realized by
paying via cc vs. cash..
sarge137
> > > As to using credit cards, I'll still use mine whenever possible to
> > > get that reward credit. My debit card pays zilch.
>
> > I agree. I use my Visa card as much as possible. I pay it off in full
> > each month and I collect points toward air mileage. It also lets me
> > avoid the need to carry around as much cash with me, which makes it less
> > likely that I will be robbed of my money.
>
> after doing a multi year look at reward cards I decided they arent
> worth the bother.
Same here. With my clean as a whistle credit reports, and near max
FICO scores, pretty much every credit card in the country has
solicited me over the years, multiple times. I've carefully reviewed
every "reward" program. Haven't seen one yet that would prompt me to
change from the card I've been carrying since the early 70s. I see
claims all the time that people net hundreds of dollars a year in
rewards payments. Frankly, I don't believe them. I move thousands of
dollars a year through my credit card account, and haven't found one
yet that would NET me that much.
If anyone knows of a reward program with ALL of the following criteria
please post a link. I'd love to see it:
1. No annual fee.
2. Substantial credit line (at least 15K)
3. Full 30 day grace period from date of transaction.
4. No minimum average balance.
5. Fix APR less than 8%.
6. Includes every penny of all transactions, not just retail
purchases.
7. Pays rewards by check at least semi-annually.
> plus a robber has no idea how much money your carrying.
That's true, but irrelevant to whether or not you get targeted by a
bad guy. You should never carry more cash than you can afford to lose
or have stolen. But, whether thats $10 or $1,000, you'll get robbed
if you're in the wrong place, at the wrong time, among the wrong
people, no matter what's in your pockets. Common sense will keep you
out of that situation 99% of the time.
Vic Smith
I pretty much felt like you did, mostly because I was too lazy to
switch the card I've been using for many years.
I think I entertained getting a CitiBank card a couple years ago, but
said nah.
Anyway, Chase started their Freedom card a while back, and I bank and
CC with them, so I had them send me that card. That was May.
Just deposited a $200 check from the rewards, and there's $45 waiting.
Have to hit $50 for them to cut a check.
So that was free money. I figure it'll end up close to $300 for the 8
months this year I've had it.
You can look up the details yourself because I hate reading that crap,
but I can tell you it meets or exceeds all your criteria except APR.
Don't know what the APR is, because it never affects me.
--Vic
krw
PeterG...@DrunkinClam.com says...
I've earned over $1000 in kickbacks from my AmEx and Chase BP cards
over the last year and I don't use the CC for everything. If the OP
thinks a free grand in the pocket (it's most of a table saw for me)
isn't worth it, fine. Most wouldn't leave a grand in unmarked $20s
on the sidewalk though.
--
Keith
sarge137
I'll give'em a look - thanks for the info.
The interest rate doesn't effect me directly either. Haven't paid any
in years. But it's a point of principal. High volume customers, on
whom they make major transaction fees, should be charged double
digital interest if they have to let a balance ride for a short time.
sarge137
> On Dec 7, 12:34 pm, Vic Smith <thismailautodele...@comcast.net> wrote:
>
>
>
>
>
> The interest rate doesn't effect me directly either. Haven't paid any
> in years. But it's a point of principal. High volume customers, on
> whom they make major transaction fees, should be charged double
> digital interest if they have to let a balance ride for a short time.
Correction - "shouldn't" be charged double digit interest
clams_casino
My Chase Visa Freedom card meets most of the listed requirement.
Lacking is just a 20 day grace period, but that's no longer a problem
having an an online account to track & pay off the account. (Discover
has a 25 day grace period, but rebates tend to be more limited) and the
8% interest rate. Mine is 14%, but I haven't paid interest on a credit
card in over 30 years so it's a moot point for me.
I'm not sure what you are asking via #6. The rewards are a percentage
of every charge, in full, although the percentage ranges from 1 - 3 %
for that acrd, depending on the general category, including charges for
eBay fees and my cable bill.
Since the Chase Visa pays 3% on three categories, but only 1% elsewhere,
I use it for groceries, gas and cable bill. I charge some to my
Discover card to get 5% rebates on selected items in certain months with
the rest going to another card that provides a 2% rebate on all other
charges as points against motel stays (essentially $1 per point,
although not cash as you request).
None of these three have annual fees, all are >$15K credit line, none
have a minimum balance and two pay via cash. For me, the third pays
an equally useable alternative. None have the 30 grace or <8% interest
rate, but both a moot points for me. I don't understand item #6, but
all three pay a refund on the total amount charged, regardless of the
source (except cash advances).
I typically enjoy $400 / year form the Chase card, another $100/ yr
from Discover and several hundred dollars / yr in cash equivalent motel
rooms - all by simply using a charge card vs.cash. I typically don't
charge <$20, where I could realize even more.
clams_casino
If you wait until $150, they will send you a check for $200.
h
"sarge137" <rboot...@yahoo.com> wrote in message news:15bd609e-054c-
>If anyone knows of a reward program with ALL of the following criteria
>please post a link. I'd love to see it:
>1. No annual fee.
>2. Substantial credit line (at least 15K)
>3. Full 30 day grace period from date of transaction.
>4. No minimum average balance.
>5. Fix APR less than 8%.
>6. Includes every penny of all transactions, not just retail
>purchases.
>7. Pays rewards by check at least semi-annually.
Citibank, except for #5. I have no idea what the interest rate is since I
pay it off every month. I suspect it is quite high.
I get back $250 by check every time I hit 250,000 "points", which happened
three time this year for a cash back of $750. Not bad since I never pay them
a dime.
krw
13g2000yql.googlegroups.com>, rboot...@yahoo.com says...
No, it's a point of interest. ;-)
> High volume customers, on
> whom they make major transaction fees, should be charged double
> digital interest if they have to let a balance ride for a short time.
"Double digital"? Why?
--
Keith
Vic Smith
<PeterG...@DrunkinClam.com> wrote:
>>
>If you wait until $150, they will send you a check for $200.
>
That's how I got the first $200 come to think of it, and how I'll get
the next.
Regarding the 30 day grace period from transaction time sarge
mentioned, I'm not sure any CC card does that.
AFAIK they all work on billing cycles.
I never carry a balance, so I'm not sure how "grace" works.
Pretty sure that when you carry a balance, most cards I've had
would figure interest on "average daily balance" within the billing
period.
What I do know is that the Freedom billing cycle is about 45 days.
Meaning a charge made at the beginning of the cycle can be
paid 45 days later before without incurring interest - if you don't
have a balance.
--Vic