Sunday, February 27, 2011

Debit Cards Becoming a Major Tool to Help with your Banking Needs.

The recent bank regulations enacted under the Dodd-Frank Financial Reform bill has created a serious situation for the banks that issue  free debit cards to their checking account holders. Under the regulation, the fees charged to merchants by banks or credit card companies for debit card transactions must be reasonable and proportional to the cost of processing those transactions. In other words, the banks that issue debit cards will be forced to give up tens of billions of dollars in revenue. Unfortunately, it's the consumer that bears the brunt of this so-called reform. The merchants will not be required to lower their prices, so the windfall will go right into merchant pockets. The consumer, the one be protected, is now going to be charged more money and be more inconvenienced at the bank he is with.

The banks must figure out a way to replace lost income, so basically they will do several things. First, they will reduce the amount of low balance checking accounts on their books, basically closing these now unprofitable accounts. Second, they will require much higher account balances to be maintained by insisting that a consumer keep $ 1000, $ 2000 or more in a combination of accounts. Also, they will not be waiving monthly account fees even if they use the debit card multiple times each month.

Finally, there is talk that many large banks will limit the amount that can be debited from a card in an individual transaction. The measures they are taking is designed to reduce losses, and raise revenue.
It is estimated that 60,000,000 people are currently not receiving financial services through a bank or credit union. That figure is going to rise dramatically over the next year. Recent Master Card and Visa studies show that over 69% of the transactions processed by these companies are debit card transactions, not credit cards transactions. The trend is clear. People are shifting to debit cards in greater numbers, but they run the risk that their costs for banking will now raise dramatically, and that their inconvenience will soar.

Reloadable, or prepaid debit cards are now becoming a major force against this consumer onslaught. There are several major players in this industry, but in many cases the cost to obtain, maintain and use these prepaid cards is very high. Be aware of cards that carry very high monthly maintenance fees, have an upfront cost to buy them, and have high transaction fees. You will not find one card that is free of any transaction fees. Free debit cards don't exist. However, if you don't need to maintain a checking account, love online banking or bank by phone, have direct deposit from one or more sources, a prepaid debit card be a major blessing to those that need it.

Anthony Fontana has been a banker, tax accountant and entrepreneur for over 30 years. When he discovers something that makes his life easier, and makes his clients' lives and businesses more effective and profitable, he loves to share it with everyone he knows! Visit: http://tonyfontana.com for excellent information on improving your life, saving money and reducing financial stress.

3 comments:

Deborah Gauthier said...

I recently had purchased a debit card for five bucks at a local check cashing center. I used it because my credit union decided to lock up my accounts because of a past due loan. Then when I was trying to straighten out my account I was hit with Identity Theft. I was contacted by my customer rep. from the credit union and denied the outrageous charges trying to be made from my account. Good thing I was using my prepaid debit card or they would have emptied my account out and I would have no money to live on until payday. I pay ten bucks a month on my debit card to have unlimited transactions per month and three bucks every time I manually add money to the card. Direct deposits are free and no bounced charge fees to deal with like the banks or credit unions charge. I now use both bank card and prepaid card so I have funds to buy necessities. When my loan is paid out I just my use my prepaid card as my primary card.

Anthony Fontana said...

Hi Deborah! Great post. You are a winner for taking control back from these CU's and banks that think they can run roughshod over people. You really should consider the LiveWallet Card at http://tonyfontana.com Grab a free one today. Also, sign up for your own LiveSpot (link on upper right had corner). That will give you access to the extensive and growing shopping mall, discount health, dental and wellness programs with doctors on call and Aetna dental, instant cashback on anything you buy from the mall!

Ruben Acosta said...

Hi Anthony,

I have been searching for an easily reloadable prepaid debit card. One that I can reload online by using a credit/debit card and the funds will be available immediately or within 15 minutes. Here are my scenarios, I'd like to keep one with my girlfriend for her use, another with team members for their expenses, etc.. Do you know of any that meet my requirements?