Debit Fees: A Government Lemon Is Really Lemonade in Disguise

In a highly annoying self-righteous liberal justification for government price-fixing of debit card fees, the Washington Post's personal finance columnist, Michelle Singletary has the nerve to condescend to the rest of us: 

But you know what? Maybe this trend to charge for debit-card purchases is a blessing for struggling households. Maybe it's time we wean ourselves off using plastic so heavily. I've repeatedly cited university studies that show when consumers use credit or debit cards, they spend more than when they use cash or checks.

So stop whining - government imposed inconvenience is good for you. 

See also my colleague Peter Suderman's post on debit card social engineering, You Can't Call It an Unintended Consequence If You Knew It Was Going to Happen. 

Comments

[Mike G]

What's stupid about this is that she seems not to know the fundamental practical difference between debit and credit cards. Debit cards, like checks, use money I HAVE RIGHT NOW. In other words, they ARE a way to get away from using plastic, that is, running up credit card debt.

[robc]

That is the good thing about debit cards. The bad thing is that people really do spend more with them than with cash.

Personally, I dont see the problem with carrying cash around. Not that I have a problem with debit or credit cards either.

[John]

You may not see a problem with carrying around large amounts of cash but I assure you the cops do. I don't think anyone in this country could operate entirely by cash and maintain a middle class existence without some cop coming and confiscating your cash.

[cynical]

That's one reason I like this: by pushing people into using cash, the banks are essentially punishing government for being idiots. Not only are they pissing off cops, but they're also making it easier for people to work and trade under the table, and cheat Uncle Sam of his pound of flesh.

[kiwi dave]

When I first came to the US, one thing I found surprising was how much people used (and still use) cash.

Growing up in NZ, since the early-mid 90s, practically all retailers took debit cards (even bars, taxis etc.), to an extent that (younger people at least) are pretty much cashless. A lot of that had to do with promotional youth and student bank accounts that gave a certain number of free transactions a month, but even without that the convenience of pretty much never needing cash becomes a matter of habit.

[adam]

Yes, next time I want to buy an ipod, or tv, or go shopping for clothes at the mall, I'll just go take out $600 in cash from the ATM. What risks could there possibly be?

[SugarFree]

I bought a car for cash once. I had [GASP] $4500 on me for about six hours. And I lived to tell the tale.

[adam]

Good thing for you that you didn't confront a mugger. Or the police.

[John Thacker]

I walked around with a cashier's check for $45,000 for a down payment for a house for a few hours. I lived.

[Every Chick On The Planet]

Wow . . I just now noticed how sexy you are.

[Platypus]

Whoa there, son!
You're gonna need some kind of "debit" card to get that cash from that machine. Try again.

[adam]

Damn. Good point. I guess I'll have to visit the bank teller between 10-1 on weekdays.

[Mensan]

Just remember they're on lunch break from 11 to 12.

[sounds real good]

Additional bonus: If you take a large amount of cash, the teller might ask you what it is for, reducing the risk to you of taking cash from the bank to pay for large quantities of drugs or handguns.

[some guy]

Fees don't apply to ATM usage, only to merchant usage. Otherwise, I think these banks would be seeing a lot more pushback.

[yonemoto]

Fees don't apply to ATM usage

Technically correct! The best kind of correct!

[Groovus Maximus]

Planning ahead when possible greatly negates risk.

None of what you posited rises to the level of emergent, therefore you plan ahead.

[cw]

Very true; that's why my favorite form of payment is the debit card. I actually find I spend more when I have cash. But, as always, the government knows what's best for me.

[Libertymike]

If one uses cash at retail shops, one is more considerate of others' time. The people who use credit or debit cards or welfare cards are, by definition, more ego-centric than those who use cash.

[Apatheist]

You clearly haven't been in line behind someone paying with coins.

[Aresen]

Aside from my own anecdotal irritation at the idiots who use plastic in the Express line at the grocery store, I think this needs a citation.

[sarcasmic]

Swipe.
PIN.
Confirm.
Done.

Gee, that took a long time.

[Almanian]

Yeah, my experience is Grandma getting into the fucking change purse is a five-minute exercise.

OTOH, cards:
Swipe
PIN
Yes (that's the correct amount)
No (I don't want any cash)
Done in seconds

Even in the Express Line. Cash - always takes longer. Maybe it's just at my grocery store...

[Aresen]

Swipe
Waaaaiittt for response.
Swipe again
Waaaaaittt.
Re-enter purchase amount because register resets after two fails.
Swipe
Waaaaiittt
Swipe again
Waaaaaittt.
Reset register again.
Cashier gets out plastic bag to wrap card in cause that seems to help.
Swipe again.
Waaaaittt
PIN prompt appears.
Dummy tries to remember PIN
Enter PIN.
Waaaaiit
Error due to wrong PIN.
Swipe again.
Gets PIN right this time.
Waaaaittt for approval.
Done.

All for a three dollar single item purchase.

[Groovus Maximus]

Must have been a big batch of Smarties, O sweet-toothed canuckistanian.

Shouldda hadda tha casha!

[skr]

i honestly cant even remember the last time that scenario happened to me.

[sarcasmic]

I can. There's an Irving gas station that I avoid because their credit/debit transactions use a satellite modem and it takes for fucking ever.

[sarcasmic]

There is an Irving station that I avoid because their satellite modem takes for fucking ever.

[Almanian]

And lol!

[JW]

Slackers.

Swipe.
PIN.
Confirm.
Done.

Since most cashiers can't provide the correct change in a cash transaction, I'm out the door while the sweating, furrowed brows are still trying to figure out how much you get back from a sawbuck for a $7.34 transaction.

[Invisible Finger]

It was that way about 5 years ago. Now with the economic downturn those idiots that don't know how to count are losing their jobs. Hell, half the stores now give you the coins via machine anyway.

[Exactly]

Swipe.
PIN.
Confirm.
Done.

Gee, that took a long time.

The redundant questions cashiers ask, like, 'will that be debit or credit' after I've already punched in my choice, are the real waste of time. In fact I'd prefer if they did not speak to me at all.

Scan the groceries

Wait for the clear

Hand me my receipt

Smile

Done.

Nope. Can't do that because every chain manager thinks folksy bullshit brings customers back.

[adam]

huh? debit cards a way faster than cash.

[sarcasmic]

If one uses cash at a gas station, one is less considerate of others' time. The people who pay at the pump are, by definition, less ego-centric than those who use cash.

[Almanian]

Oh, snap!

[Almanian]

PS Bonus is you can gas up your moorsickle while still sitting on it, creating less downtime and providing, therefore, more riding time. Which is always good.

I

[T]

+eleventy

If I can't pay at the pump on the bike, I will get gas elsewhere.

[JW]

I have to suppress my urge to strangle every time some old lady in line in front of me whips out her checkbook. I know I'll never get those precious minutes of my life back.

[SugarFree]

Nope. After I seen how hard it is for the average retail illiterate to count out change, I'd say it's a wash.

[JW]

Missed it by *that* much.

[SugarFree]

I have a hard time with contractions after "I." I think I might have brained my damage.

[sarcasmic]

Try giving the cashier $21 for $5 plus change.
They'll keep handing the $1 back to you until you insist they just punch the number into the machine, and then act awe struck as it instructs them to give back two bills and some coins.

[BakedPenguin]

I often calculate my gas purchases based on how much whatever else I'm buying costs, to then round it out.

More than once, a clerk has appeared astonished or irritated at my request for $17.34 worth of gas after ringing up $2.66 in soda, and then been amazed when the total appears.

[Almanian]

Oh, god yes, both BP and sarc ^^this^^

"Why are you giving me the change?" "How did you know it would total an even $20?"

Derp...MAJICK!

[Mainer]

The register was down at Wendy's, but the girl kept looking at it to tell her what change to give me from a twenty. Finally she worked out the change on a pad of paper. I wasn't sure to be sad that she couldn't count back change, or impressed that she could subtract two numbers with pencil and paper.

[PR]

when I worked at McDonalds in high school we subtotaled your order, calculated sales tax, and the total in our heads. The total was all we rang up.

[Ted S.]

This happened to me 20 years ago when I was studying in Russia. I bought something that cost 32 rubles 80 kopecks, and handed the old lady at the register a 100- and a 3-ruble note. Thanks to the odd set of notes Russia was using at the time, this meant I should have gotten back two 25s and two 10s, plus 20 kopecks as change. The lady handed back the 3, and proceeded to make 67 rubles in change. Worst of all is that she didn't have any 20-kopeck coins, so I got twenty 1-kopeck coins.

[Joe M]

This reminds me of something that happened a long time ago when I was a kid at a grocery store with my brother and dad. We bought six of something, can't remember what, that were I guess 17 cents each.

For whatever reason, the register wasn't working, so the cashier had to figure out the total. Well we had all in our heads figured out it was $1.02, but she got out a pad of paper and added 17+17+17 to get 51. Then, rather than just double that, she wrote down 17+17+17 AGAIN, and added it all over for the same amount, then added 51+51=102. We still joke about it when we get together.

[Abdul]

I spent my high school summers working at a gas station that was full-serve, cash-only, no registers or calculators.

Every September i'd return to school able to add or subtract like Rainman. As the semester went on, and I lost practice, I'd fall back on the old pencil & paper or calculator.

[Apatheist]

I avoided getting a credit card for years. I always figured, what exactly can I do with a credit card that I couldn't do with my debit card? My parents finally convinced me this summer to get one so I can build up credit but I have just set it up to automatically get paid from my checking account so it basically operates like a debit card.

By the way, how fucked up is it that by living debt free for seven years I somehow have bad credit? Seems counterintuitive.

[Aresen]

I had two credit cards until last summer.

I only used one of them & decided to get rid of the other, simply because it was unused and represented a risk if I ever lost it.

So I cancelled the second card. A friend pointed out to me that I had just lowered my own credit score.

[rts]

I use a credit card for every purchase and bill that I can, and pay the balance at the end of the month.

Paying the balance means no interest, and the card gives points (that can be redeemed for merchandise), extra warranty, etc.

It's well worth the yearly fee.

[Shocked]

We do the same thing. Have excellent credit score, but it would actually be higher if we carried a balance on our credit cards from time to time.

[Mensan]

Yearly fee? Why would you ever open a credit card with a yearly fee?

[rts]

... in order to get the extra goodies that are largely subsidized by other interest-paying customers?

[Tman]

living debt free for seven years I somehow have bad credit?

You don't have "bad" credit you have "no" credit. Credit scores are based on several factors, and one major factor is how much "available" credit you have, meaning how much money are banks willing to extend to you via a credit line, and how quickly do you pay it back.

[Matrix]

I had that issue. Up until 2 1/2 years ago, I did not have a credit card, so it was hard to get any kind of credit without usurious interest rates. I finally got a card and have been mostly paying off the balance every month. I got a few other cards as well, and now my credit is in great shape.

[Seamus]

The usurious rates shouldn't be a problem if you pay off your balance in full each month.

[Matrix]

It wasn't the credit card rates I had a problem with. It was trying to get small loans. The loans had really high interest rates.

[JustDanAZ]

Right spot on, Mike! Especially rotten about this is that the banks enticed people into using debit cards for everything by tying them to a miles and points reward system!

[NoVAHockey]

She has a rotation of columns. 1) all debt is bad, 2) check cashing places are evil, 3) my grandmother did it this way and so should you.

[JW]

I actually don't mind her so much, because usually she doles out common sense advice and decent advice at that. I'm always blown away by these idiots she sometimes highlights, who have managed to run up $20,000++ on their credit cards and are in deep shit now, just because they wanted new stuff.

Now Pearlstein and Klein make me want to punch my newspaper. Fucking wretched inkstains.

[NoVAHockey]

I just find her to be repetitive. Those "debt-free" challenges you're referencing shouldn't surprise me the way their do. I've stopped reading Klein at my wife's request.

[JW]

I just find her to be repetitive.

True, but considering her audience, I don't think she has a choice but to keep repeating herself. "Nope, you still didn't fucking listen, now did you?"

[DesigNate]

I think it's cause she thinks it is a damn shame that the FED is printing out all of these shiny new bills and nobody wants to use them instead of their debit card.

[kilroy]

Bennie and the InkJets!

I love that damn line.

[Ted S.]

Santa Claus the Quantitative Easer

[spambot]

But that spending is key to their recovery efforts so........

[Groovus Maximus]

Maybe it's time we wean ourselves off using plastic so heavily.

I agree. Shall we apply this to EBT cards as well?

[Jordan]

I'll bet she simultaneously believes in Keynesian horseshit like aggregate demand (i.e. we should all be in debt up to our eyes for the economy to function).

[JW]

I've repeatedly cited university studies that show when consumers use credit or debit cards, they spend more than when they use cash or checks.

If you want to track your spending, so you know where your money is going and adjust accordingly, then a debit card is the only way to go.

I'm slightly obsessive on Mint.com. I make sure to show the kids just how much money the wife and I spend on them. I'll be damned if they grow up with the now-fashionable overdeveloped sense of entitlement. "That free shit costs MONEY."

[NoVAHockey]

how long did it take to set up your mint account? it's been on my list to do but keeping getting bumped.

[JW]

Not long at all. Set up all my accounts and downloaded the transactions in under an hour.

[un boliviano]

same here, they make it very quick and easy. Make sure you know/have handy the usernames and passwords for the financial services you want it to connect.

[John]

But if the wall street protestors get their way, we won't have credit cards or debt. No kidding.

Demand eleven: Immediate across the board debt forgiveness for all. Debt forgiveness of sovereign debt, commercial loans, home mortgages, home equity loans, credit card debt, student loans and personal loans now! All debt must be stricken from the "Books." World Bank Loans to all Nations, Bank to Bank Debt and all Bonds and Margin Call Debt in the stock market including all Derivatives or Credit Default Swaps, all 65 trillion dollars of them must also be stricken from the "Books." And I don't mean debt that is in default, I mean all debt on the entire planet period.

http://althouse.blogspot.com/2.....treet.html

Idiot nation baby.

[kilroy]

Fight Club!

[Almanian]

Wow.

Wow.

Wow.

[Platypus]

I know. 'Cos, like, not having to pay for stuff is gonna bring about Utopia, man. Money is theft, or something.
*puff puff*

[Mensan]

Exactly! And possessing things that you didn't pay for (and weren't gifts) is ... oh, wait.

[Fluffy]

I tend to spend MORE when I have cash because I continue to spend until I am out of cash.

I'd also like to note that the whole BankAmerica kerfluffle exposes exactly how corrupt our political system has become.

Why does Durbin think that BankAmerica should care what his opinion about their fees is? Answer: Because to him it's axiomatic that if you offend a Senator by your behavior, you should expect retaliation.

If we were truly a free country, and if our leaders were truly not abusive tyrants of the larger or more petty variety, BankAmerica wouldn't have to care what Durbin thought of their fees. It would be irrelevant. The only reason for Durbin to EVEN COMMENT is if he's assuming that BankAmerica should acknowledge his ability to use arbitrary power corruptly and to fuck them somehow and he thinks they should comport themselves accordingly.

[T]

Yeah, but Durbin fucked BofA in the first place and handed the money over to retailers. Then he acts surprised because they want to recoup the money his regulation is costing them.

Disingenuous fucktard. I hope he gets shat upon by elephants.

[Almanian]

shat upon by elephants

So, "santorumed", then?

[Brandon]

I love it when you quote Shakespeare.

[adam]

And then he advocates for customers to switch to the community banks/credit unions that he exempted from the rule that caused BofA to impose the fee in the first place!

[Almanian BH Obama]

I continue to spend until I am out of cash

I like the cut of your jib, and am interested in bringing you into my cabinet.

[Mainer]

Why should running out of cash stop you spending. That attitude Disqualifies you from BOH's cabinet.

[R C Dean]

Not when they own the printing press, it doesn't.

True fact: The Fed's quantitative easing consisted of buying most of the debt issued by the Treasury.

[Abdul]

Government should lock all credit cards in child-proof prescription bottles so the 99%ers don't become enslaved to the corporations by buying an assload of ironic t-shirts and PBR.

[Fluffy]

BTW:

Everyone who has debit cards that are also Mastercards should always select the "credit" option at store terminals.

It still hits your account almost immediately, so it works almost exactly as a debit card from your perspective.

But I'm pretty sure that when you select "credit", the merchant gets hit with the credit card fee instead of the debit card fee. So that means that hitting "credit" will evade the price-fixing applied to the debit fee and hit the merchant with the full credit card fee.

[Almanian]

Yep - my wife the ex-banker taught me this one. Also saves punching in the PIN in most cases...

[Gimlet]

True, but if you select "credit" you can't get cash back, which means an extra trip to an ATM.

[Griffin3]

Greece, Italy, Mexico had banned cash transaction over a few thousand dollars as of a year ago (I dunno what has transpired since, this was result of 30-sec google search). Us gov't requires reporting of cash transactions >$5,000 or 10,000, depending on the business, or it's a crime (87% conviction rate, 63 months avg sentence, if charged (allegedly)).

Perhaps Miss Singletary missed the memo from her big gov't friends, that cash was discouraged lately, and electronic transactions were actually encouraged by the US government. So they can track it better. For your own good, of course ...

[John]

^^This^^ As I said above, you could not live on cash alone without ending up in prison.

[T]

Don't forget, withdrawing the cash in several transactions to avoid triggering the reporting requirement is also a crime.

[John]

And if the cops catch you with cash, they can just take it from you and it is up to you to prove to a judge that you are not a criminal. It is fucking disgusting and outrageous.

[T]

Even better is when they charge the cash with being illegal.

[Matrix]

Don't be caught by the police with large amounts of money on you. They'll claim it was for drugs, and you'll never see it again.

[Davebo]

Try getting a rental car with a debit card. Not a simple evolution I assure you.

Like it or not a credit card is a necessity. That said, after 12 years Amex can kiss my ass.

[Zeb]

I have rented a car with just a debit card. I was a bit surprised that they took it, but it worked.

[Fire Tiger]

I've repeatedly cited university studies that show when consumers use credit or debit cards, they spend more than when they use cash or checks.
Well isn't that a brilliant statement. The next thing she will discover is that people who take out auto loans spend more money on vehicles than those who pay in cash.

[Platypus]

Did these studies only look at university students? 'cos no one spends money faster than college kids with their parents' AMEX cards.

[Matrix]

I don't live anywhere near my credit union (600 miles away). So any time I want cash, I have to go to the ATM. That costs $3.50 every time I want to pull out money. Nope. Not going to throw my money away like that. I just stick with my card. And if someone swipes my wallet, I can call and cancel all of my cards before they have a chance to use them. Then I'm just out the price of a new license.

[Colin]

When they print the fee on the banking statements they should flat out call it a "Dick Durbin fee."

[hancock]

You guys aren't understanding how this plays out in libs/progressives' minds. To them, it's not a rational-choice response to the new legislation; it's just greedy malfeasance by the banks. Instead of targeting the offending legislation, they'll just give some claptrap about CEO pay and record bank profits and how these fees are just corporate greed blah blah blah...

[Proprietrist]

I lost my minimum job at Arby's because I got caught spitting in someone's food. Because my boss didn't "get" my sense of humor, I can no longer pay off the interest on my loans for art school. Now I had to sell my illegitimate children into sex slavery to fund my meth addiction.

I am the 99%.

[99Percent]

One word solution : Bitcoins

[Zeb]

The use of cards is artificially raised by bans on charging more for card purchases. Since retailers pay a percentage of each transaction to the card companies, it would make sense to some retailers to charge an extra fee for using a card.

[Mensan]

This seems like as good a place as any to mention this; I just opened a new bank account with USAA because I was pissed off about all the new fees at my former bank.

If any one is looking for a new bank I'd recommend checking them out. There are no fees, and they even reimburse other banks' ATM fees, but it's a trade off since they only have one actual branch (it's in San Antonio) and making deposits (except direct deposit) is a little inconvienent.

[Brandon]

Over on the Fark thread about this deal, alot of people say pretty much this exact same thing, but they follow it up with "so you libertarians are stupid to blame the government because they exempted credit unions" and some stupid shit about this being a failure of the free market. Just like Jesus and Tim Tebow, I don't really have a problem with credit unions, but their fucking fans make me want to murder somebody.

[St. Mark]

Quiet yourselves, mine brethren, for Sister Singletary says nothing which is not in honor of our betters in Holy Government. Is it not our solemn duty to praise all that Holy Government grants to us all? Does not walking a separate path, alas, far astray, not a stain upon ourselves? For all those who faithfully follow the teachings of The Community Organizer, we must support Sister Singletary in her worship.

[Corey]

I don't know - the article didn't seem condescending to me. She doesn't seem to be taking a stand on the validity of the legislation, but as I read it, saying "Since it's here to stay, maybe consider going back to cash, since that will cause you to think about your purchases more"

You may not agree with this advice, but it's an acceptable opinion for an advice columnist to have. Especially since her audience mostly consists of people who overspend.