15
Will that be debit or credit?
The Fed says revolving credit (see also: credit cards) had a big drop off this summer, more than 8% on an annual basis. Meanwhile, debit card usage has taken off. People are leaving the plastic in their wallets, and instead using the... other plastic. Good thing?
There is some indication that the shift to debit is partly a visceral reaction to credit card industry practices in the past few months. Since a law was passed in May that will limit the industry's ability to raise rates and fees, many issuers have cut credit lines and increased rates, forcing borrowers to look for other modes of payment.
"Part of this is kind of consumer backlash against the industry due to its practices," said Curtis Arnold, founder of the consumer Web site CardRatings.com.
A testimonial from the Post story:
Larry Jones, for example, wants nothing to do with credit cards once he pays off his $2,500 bill. He recently moved from Chicago to live with his brother in Baltimore after losing his public relations job. With no steady income, he has stopped using credit -- "You're spending money you don't technically have," he said -- and switched to his Chase debit card.
"This works better for me," he said. "It gives me peace of mind to use my debit card. You take the heat up front."
On the other hand, if you pay off your credit card every month, you don't get hit with fees and in many cases, you get miles or other "rewards."
With debit cards, there's the overdraft problem. The Center for Responsible Lending has a new study that says bank overdraft fees have increased 35% in two years:
It is inappropriate for our nation's banks and credit unions to rely on fees unfairly stripped from their customers' accounts.
The runaway cost of this practice and our current economic situation make overdraft reform urgent.
The most common trigger of overdraft fees are small debit card transactions that could easily be denied for no fee. This is how things used to work, and according to a 2008 nationally representative survey, it's what the large majority of people prefer.
A couple of charts from the CFRL:
Look at that. Americans spend more on overdraft fees than fresh vegetables.
Personally, I'm a debit card guy for the most part. I think I'm more disciplined that way. I just make sure I don't overdraft. But I'll mix in a little credit card use now and then, only as much as a I can pay off that month.
More tonight on Marketplace. But what about you? Which do you prefer?
Pages
Credit cards (w/cash back) for as much as possible, pay off every month, a little cash in my wallet for stuff under 10 bucks. Never use a debit card, except to get cash from the ATM. Save up & pay cash for everything. (Gosh - we sound so boring!!)
No, I wouldn't say boring. I would say upper middle class. I know I got into credit card problems not because I was living greatly beyond my means, but because I didn't have much to live on.
If you are employed with the government after college, you start at a GS-5. That's 29,656 a year (before taxes). If you consider rent, student loans, car payments, car insurance payments, health insurance payments, electric bill, cable bill, internet bill, state motor vehicle fees, gasoline, and savings..just to name a few...you don't have much left. That's when people get into debt.
True, credit is needed for industry but consumer credit is not the same as business credit and you should never confuse the two.
Fact is no economy can function that is 70% consumer based. Credit, shells games, and "financially innovative products" are not the same a productivity. These things are instead just a way for those with power to continue to leech off those without. People need to stop using credit cards for shiny plastic junk they don't need. I hope CC use drops at 8% every year. This goes on long enough and maybe we can get some sanity back into our system.
I got into trouble with my credit cards when my marriage became a voracious black hole ... but in the years leading up to that, I earned as much as $500 cash in annual rebate and kickback benefits from using my cards for monthly expenses that I paid off in full.
Guess what? I still do it (that is, now that my credit and my finances have recovered). I am worried every time that I use my debit card that the number will be compromised (stolen) and I'll be liable for the fraudulent charges. So I only use it with a few, big, trusted brick 'n mortar stores. But NEVER with online entities. For those, it's credit, or Paypal, or adios.
I'm aghast that consumers are being led into using debit cards out of a disdain for credit card practices, when the consumer protections just aren't there. What are we thinking? It's "just like cash." It isn't. Credit card purchases may be on the decline, but mark my words Scott, I'm betting that fraud will bounce back with a vengeance. Here's to hoping I'm wrong....
I also recently switched to cash only, and just use the debit card for subscription services that take nothing else (iTunes, Netflix). Also, my bank (5/3) allowed me to set the debit card to refuse any charge that would send the account below $0, without fees.
Cash forces you to budget purchases week to week, plus it's cool to pay for things with Benjamins baby.
<i>It is inappropriate for our nation’s banks and credit unions to rely on fees unfairly stripped from their customers’ accounts.</i>
<i>The most common trigger of overdraft fees are small debit card transactions that could easily be denied for no fee. This is how things used to work, and according to a 2008 nationally representative survey, it’s what the large majority of people prefer.</i>
I don’t see how these are unfairly stripped - it’s people paying with money they don’t have. I think denying would be better, but the blame lays squarely at the feet of the person who didn’t know how much money they had.
We used to be 100% credit card to max out cash back awards. We recently switched to cash only (with the exception of gas and our telecom bills which automatically go on our credit card) because it helps us be much more disciplined.
<i>It is inappropriate for our nation’s banks and credit unions to rely on fees unfairly stripped from their customers’ accounts.
The most common trigger of overdraft fees are small debit card transactions that could easily be denied for no fee. This is how things used to work, and according to a 2008 nationally representative survey, it’s what the large majority of people prefer.</i>
I don't see how these are unfairly stripped - it's people paying with money they don't have. I think denying would be better, but the blame lays squarely at the feet of the person who didn't know how much money they had.
We used to be 100% credit card to max out cash back awards. We recently switched to cash only (with the exception of gas and our telecom bills which automatically go on our credit card) because it helps us be much more disciplined.
Me and Larry Jones have something in common. I used to charge everything, then pay off my credit card at the end of the month to earn maximum "cash back" towards credit purchases. But now, with it being hard to budget week-to-week, let alone month-to-month, as soon as my credit card is paid off, it's going to be strictly Debit for me.
Pages
