Word: debits
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Americans are carrying record amounts of debt--and seem determined to do something about it. Two recent studies from Dove Consulting and the American Bankers Association show that credit cards have been overtaken by debit cards as the plastic of choice. Some 26% of consumers now pay for most purchases with debit cards, which draw money directly and immediately from their checking accounts, while 21% mainly use credit cards and pay some portion of the bill when it arrives...
...this happening? Consumers, feeling less flush than they did in recent years, say using a debit card helps them manage their money better. "It doesn't allow them to overspend," says Richard Crone, a Dove vice president. And while writing checks serves the same purpose, it's a much bigger hassle for you--and it's much less profitable for the banks. They make 60[cents] in merchant fees, on average, every time you sign for a debit-card purchase. And they don't face the risk of nonpayment posed by credit-card transactions. That's why they're giving...
...particular, banks are trying to push debit cards onto those credit-card customers who avoid interest payments by clearing their balances every month--the so-called convenience users. But it's precisely these customers for whom debit cards make the least sense...
...days to pay the bill. During that time, the earning power of your money is yours, not the merchant's or the bank's. That cushion also gives you time to return defective merchandise or dispute a transaction before you have to pay for it. Not so with debit cards, though issuers are so eager for consumers to embrace them that they routinely "give the customer the benefit of the doubt on a bad transaction," says George Albright of Speer & Associates, an Atlanta-based consultancy...
...everything from round-trip plane tickets to college tuition (on Citibank's Upromise card) to your teen's braces (on Diner's Club, which lets you choose a reward once you hit 100,000 points). Chase allows you to earn Continental Airline miles by using your debit card, but at a rate of half a mile per dollar spent--vs. one mile on the typical credit card...