The news that several major banks are planning to charge consumers a monthly fee for using debit cards appears to be an attempt to drive consumers to a greater use of credit cards. Why?
- First, new regulations have taken effect that limit the fees that these banks can collect from merchants whenever a consumer uses a debit card. It does not appear that these same limitations will apply to the use of credit cards.
- Second, consumers have been making a conscious effort to pay down credit card balances and to voluntarily limit their use of credit. Lower balances mean less interest can be collected by the banks, further cutting into their profits. If the banks can drive credit card balances up again, interest receipts should increase and profits should rise.
- Third, many banks are already charging consumers fees for the privilege of carrying one or more of the bank’s credit cards in their wallets. The fee may be called a monthly or annual service fee; a membership fee (one must wonder what the consumer is a member of); or any one of a number of other euphemisms for a cardholder fee. Increased use of credit cards is likely to lead to new accounts being opened and an increase in fees that can be collected by the banks.
If you are one of the many consumers who has resolved to reduce your debt and live within your means, stay firm in your commitment to living in a personal cash economy. It may be hard to break the credit habit; but, your family’s financial well-being hangs in the balance.
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