Debit Indebted

Next year, Bank of America (among others) will begin charging debit card customers a $5 monthly fee.

Banks are making the change because revenue from lucrative interchange fees paid by merchants (a.k.a “swipe fees”) is being cut in half by a new rule issued by the Federal Reserve Board that takes effect Oct. 1st. So, instead of an average of 44¢ per transaction, banks will only be earning 24¢. Bank of America estimates that it will lose $2 billion annually because of the change. So, what’s a poor bank to do? Well, they’ll negate their losses by shifting their costs onto consumers, of course.

Even beyond avoiding the aggravating new monthly fee, using a credit card has distinct advantages.

Federal laws protect credit card users from fraud much better. The Fair Credit Billing Act ensures that you bear no liability for fraudulent purchases, damaged goods, and products that were never delivered. And you generally have 60-90 days to report fraudulent or erroneous charges to the bank.

credit card mouse trapThe Electronic Transfer Act does provide debit card users some protection during a dispute or error but only if you catch and act upon the issue quickly. If you notify your bank within 2 days of a questionable charge, your liability is limited to $50. However, between 2 – 6 days your liability could increase to $500. Beyond 6 days, you may have no coverage. And to dispute a debit card transaction, you may be required to prove that the card has never been used online on an unsecured network.

And remember that with a credit card dispute, you’re questioning fraudulent or erroneous transactions before you’ve paid the bill. With a debit card, the money has already been withdrawn, so recovery is going to be much more difficult.

Given that debit cards are directly linked to your bank account, a thief who obtains or clones your debit card along with its PIN may be able to clean out your bank account, and you’d have little or no recourse.

By the way, many banks claim that their debit cards can also be used as a credit card. While it’s true that these transactions may take slightly longer to post to your checking account, they’re still a debit transaction. So, using your debit card in this manner does not afford you the same protections or deferred payment opportunity as a “real” dedicated credit card.

The biggest disadvantage of using a credit card over a debit card is self-control. You have to make sure that you’ve saved enough money to cover your purchases when the credit card bill arrives in order to avoid finance charges. Since the money is not being taken out of your bank account immediately as you make purchases, there’s a high risk of overspending and accumulating interest-bearing debt. But with a little self-discipline you can actually avoid the finance charges and earn money on your purchases.

So, do you use debit cards? And if so, will these needless new fees affect your debit card usage?

Patience Needed – Now!

Windows Vista dialog box

In these Bluetooth-enabled, bullet-pointed, increasingly-digital times, I’m worried that we’re losing something truly vital — patience. It appears that we’ve all but lost the ability to delay gratification and recognize that some things really are worth waiting for. Our society is so focused on the now that we’ve forgotten about the value of later.

What’s especially scary about that loss is scientists now believe there’s a link between delayed gratification and intelligence. At the very minimum, it’s a given that tolerance & patience are key indicators of emotional & social maturity—and we’re presently in very short supply of those much-needed qualities.

Gimme Credit!

So I happened to be thinking about layaways recently. For those not old enough to recall, this used to be a way to purchase an item when you didn’t have enough money to buy it outright. You’d take your merchandise to the “Layaway Counter” at the store, where the clerk would set your item back and take a down-payment. Then you’d go back from time to time to make additional payments until you had the item paid off. Only then did you get to take your new prized possession home.

But now just about anyone with a pulse can get a credit card, regardless of their ability to repay the lent money. So, people find some goodie at the store, swipe their plastic, and away they go with the new prized possession—with little or no thought about whether they can actually afford (or need) the item.   Sure, we all like the immediacy of getting some great new thing right now, but at the same time, maybe something’s lost when we succumb to those impulses. (We’ve certainly seen the mess that credit can cause with the recent financial crises.)

But my point isn’t whether people should have credit or not—it’s about self-moderation and the value of delaying gratification. Deferring a purchase can give you a chance to evaluate “want” versus “need” and once you’ve distanced yourself a bit, often you’ll find that the need just isn’t there. Back when credit cards weren’t so prevalent, anticipation made the end result all the more rewarding.

Picture This!

And do you remember when you used to have to snap a roll of photos, drop off the film canister for development, then wait days to get the prints? The immediacy of digital cameras—click the button and take a dozen shots, then just toss the ones that don’t make the cut right into the bit bucket. Take the best of the lot, tweak &; crop the image, and blast your masterpiece to the nearby printer. But here again, maybe there’s something lost in the instantaneousness of it all.

I’m not ready to forgo my digital camera and revert back to film, but I do believe that the expectancy made the experience all the more rewarding when you finally pulled those prints out of the little envelope and saw your handiwork for the first time, days (or even weeks) after the shot. Certainly, we were much more judicious about snapping photos then, knowing that even the crummy ones would cost.

Listen Here!

Have you noticed that as music has become easier to acquire, it’s also become far more disposable? Count the number of truly great albums you’ve heard in the last year and compare that to maybe 5 years ago. With the immediacy of digital music, it seems consumers are at the same time more demanding, yet less discriminating. That is, why bother buying an entire crappy album when you can just cherry-pick the 2 individual tracks that are good? Many artists are feeding into this mindset by focusing on quantity rather than quality, a kind of scattershot approach.

And while a new album used to be something special—you anticipated the release for weeks, eager for the day when you could finally go to the store and plunk down your cash for the new record or CD—I wonder if we’ve lost some of the significance now that music is just a quick click away on the Internet. Music used to have a tangible quality as well, with the album cover and liner notes adding to the overall experience. I thoroughly enjoy listening to my iPod & MP3s, but at the same time, music downloads just seem somehow less substantial, slightly less meaningful than their old physical predecessors.

Hold Up!

Increasingly, there’s a startling lack of patience and everyone’s clamoring for instant gratification with very few people noticing the consequences, It’s a nasty Catch-22 loop—we want something right now, but the meaning or significance is often lost because of the immediacy and we just end up wanting more all the sooner. Or upon following that “get it now” impulse, we discover that it really wasn’t all that desirable or special after all.

Each successive generation seems to be coming down the pike expecting more & more immediate gratification. I don’t necessarily think technology is to blame, but the one-click immediacy of the digital world is certainly an unbelievably fertile breeding ground for the “gotta have it now!” mentality that’s pervading society.

What do you think? Anyone else noticed how impatient people are becoming? Is our society experiencing a massive breakdown of self-control or am I just having a massive case of nostalgia?

April ’08 Blogtipping – All About the Benjamins

Blogtipping iconWhat with April bringing a close to tax season and lots of people getting those handy rebate checks in, "personal finances" seemed like a really suitable topic for this month’s Blogtipping post.   The Internet is peppered with all kinds of great sites with terrific information about personal finances — far more than I could mention here — but here are 3 blogs I frequent that really have something special to offer:

Generation X Finance by Jeremy Vohwinkle has articles that’re geared towards "Generation X" but I keep coming back because:

  1. While the topics may be geared towards those in their late 20s – 30s, the great info here is applicable to anyone.
  2. Very practical packing tips!
  3. Clean site design!
  • Tip: Hey Jeremy, maybe you need a snazzy logo for your site?

Dumb Little Man from Jay White isn’t strictly a blog about money matters but it’s definitely worth a look because:

  1. Tons of useful articles on healthy living, personal development, organization, & finances.
  2. Easy-to-navigate site design!
  3. DLM Blender scoops up great posts from around the Web.
  • Tip: I’d like to see just a few more images in the posts.

Wise Bread is a fantastic group blog for personal finance & frugal living tips.   There’s lots to like about this community-driven site:

  1. Tons of practical & applicable tips for living large on a small budget.
  2. You’ll definitely want to subscribe via email or RSS feed to keep up with the very frequent updates.
  3. Very active forum provides a place to interact with others amd get even more info on making every penny count.
  • Tip: This is one of my never-miss mainstay blogs — I can’t think of anything that’s missing.

As a bonus, SNL offers a revolutionary debt & money-management program.   Chris Parnell teaches Steve Martin & Amy Poehler the secret to financial success.   Stop whatever you’re doing right now and go watch this hilarious video at Consumerist.com:

     

Now it’s your turn!   What are some of the personal finance blogs or sites that you frequent?   Post a comment and share the wealth!