Today’s article is Banks’ newest game: Debit card fees, by David Ellis. It centers on the new trend in the banking area to institute loyalty program fees or other debit card fees. Basically, the banks are hesitant to lend money, thanks to all the problems that have resulted from over lending to high risk borrowers (and others), and now with the new credit card legislation that will go into affect soon, this is the avenue that will anger the least amount of people.
These loyalty programs are similar to those of the credit cards, where you earn points toward cash back or other “prizes”. As usual, however, it takes a TON of points to earn anything worthwhile. Luckily, a debit card doesn’t put the consumer further in debt, and these cards give the banks 1%-3% fee per transaction (However, lobbyists for retailers are trying to get that fee capped). UN-luckily, to use these new programs, many banks are charging yearly (or monthly) fees. This means that you have to use your debit card all the time and HOPE to earn the rewards while paying a fee for the PRIVELEGE to be in the program! How fun, right?
Our advice? If you can’t control your spending, and are detached from your debit card, the way you were from your credit card, and it’s not like spending money because it’s plastic…stick to cash. If you can handle using a debit card, use it. We don’t have a problem with them, since the money comes directly out of your checking account…but be aware, overdrawing on your checking account with you debit card is NOT responsible, and if that is you, GO BACK TO CASH! On the subject of loyalty/reward programs? We think you should just skip them. It takes crazy amount of effort to get anything, and costs a yearly fee on top of it! What a waste.
Tags: accountability, economy, Financial planning
