Friday, October 14, 2011

Use Credit Cards Instead Of Debit

credit card processingBank of America’s announcement to charge a monthly debit card fee last week has turned the credit card processing world on its head.  But for industry insiders this move has long been expected as banks try to recover the lost revenues no longer available to them as a result of the Durbin Amendment.The credit card processing industry will survive and somehow manage to find a way to become even more profitable.  It is consumers who are most bent out of shape by this move yet they shouldn’t be.  The big problem is that the banking industry has spent years teaching the public to become reliant on their debit cards but it was a mistake for consumers from the get go.

At first nobody really understood the differences between the debit and credit card processing fees and cost.  They only saw that banks were using gimmicks to encourage use and if done correctly, users made out like bandits.  There were no real debit card fees for most point of sale transactions but they were loaded with reward points which quickly added up to extra cash.  Some users earned hundreds of dollars per year using their card the same way they would use cash.  It made no sense to use anything but debit.
I myself chose to use a debit card to pay for dental surgery and received $53 back from my issuer at the end of that quarter which effectively gave me a discount off of my procedure.  Throw in groceries, gas and utilities and I was a debit card junkie.  Then came the increase in fees from merchants for credit card processing on small items like chips and gum.  It was then that I noticed there was a significant cost to using debit cards.
Now that rewards programs have come and gone, and the banks can no longer charge high fees for POS transactions, they are resorting to monthly charges on checking or savings accounts with debit cards tied to them, and turning to tricks buried in the fine print of their terms of service agreements to generate higher fees to replace lost revenues. Consumers need to be aware of this and stop using their debit cards when credit is an option.
Debit transactions are immediately taken from a users account which makes fraud a lot more difficult to deal with from a consumer’s standpoint.  Traditional credit card processing provides a much better challenge process and is much safer than using debit.  For someone who pays off their credit statements monthly so they don’t accrue interest charges, there are still plenty of cash back programs which make using credit extremely attractive.
Speaking of cash, why not use that? Cash still spends and many merchants offer discounts for its use because they pay no fees what so ever.  Cash may not be the safest thing to carry but using it is your least expensive option.  The real point here is that smart consumers need to be aware of the current, and upcoming, changes in the credit card processing industry