Why so many banks are pushing debit cards ?

I have received several promotions by banks paying me hard cash for using their debit cards a certain number of times. Being a FW, of course, I accepted the deal but cannot understand
what is in it for the banks when they can get more commission from stores if I were to use
my credit card instead.

how do they know it would be "THEIR" brand of credit card

also credit card they risk lending you $ and if you pay by grace lost $. Debit card no rish involved

They can lose $$ on you and still make money. It's a big world.

No, credit card companies do not charge the same fees for CC's as Debit cards. Debit card fees are a lot less. That's why you will see some places accepting debit cards but not credit cards. I think banks are pushing debit cards so that people have less cash in there accounts, potentially going below minimums, etc. and there is no risk.

Fact is that Citibank, MBNA, BoA, JPMorganChase issue most of the credit cards in the world so they are the ones monopolizing merchant fees. Other banks may be pushing debit cards and then later potentially pushing fees or trying to gain loyalty to their checking accounts.

Transaction costs are low + increased merchant surcharges.

Banks have agreements with the companies represented on their debit card (VISA, MC, etc). They make a percentage of the transactions flowing through their debit card. Thus, they can afford to give you Cash Back or incentives. It just reduces the overall percentage they receive from their partner companies.

joebloe said: Sovereign Bank, which absorbed my old bank, issued me a debit card with the VISA symbol. I brought it back and insisted on a regular ATM card without the VISA symbol and they said they don't have that option. I told them that's bullcrap and I closed my account. Why are they forcing this debit card on us?You have it easy...the VISA logo on my bank's ATM card will release a deadly cloud of poison gas if it's not used as a debit card. It's a shame I can't just, you know, not use it as a debit card.

I work in a branch and I'll give you two reasons why your bank wants you to use your debit card. First and foremost, the more services the bank is providing you the less likely you are to leave. If you become dependent on your debit card you will be less likely to switch banks and have to wait 10+ days for your new card to arrive. The other great thing about debit cards is that merchants take days to report purchases, merchants hold MORE than the transaction amount, and customers don't log debit card purchases in their check registers as often. The vast majority of my customers believe debit card purchases hit their account immediately. This is not the case. I'm estimating here but I'd say over 50% of our overdraft fees come from customers who made debit card purchases all weekend, called to check their balance, and then wrote a check that they thought would clear without an overdraft. If you log your debit card purchases in your check register this can all be avoided and I'll be out of a job...

I know banks prefer signature based transaction as they carry normal credit card transaction fee. I was told pin based tranactions charged are flat fee $.50 cent per transaction does not matter the dollar amount. And many banks limit the pin based transaction to $500 per pin transaction but normally have a higher daily pin limit. I know some of the big merchants in California sued Visa/MC over fact they make transaction limit lower than daily limit thus causing the merchant to swip the card more than once on large purchases which causes them to pay $.50 cent transaction again. I dont remember the outcome of the case tho.

limeygit said:
Banks place a 'hold' or 'autherization' for the amount pretty much immediately, but this is released after x amount of time (24 hours in business days probably), and many merchants do not process through the transaction for several days. That makes an account yo-yo, and people who rely on ATM machines or tellers or phonebanks or online banking, rather than keeping their own records, end up thinking they have more money than they do, because they check after the hold is released but before the charge comes through.
Banks are aware of this, but quite frankly, if you are too lazy to bother keeping track of what you spend, then they have no problem taking your $25 or $30 or $35 or $40 in OD fees. An average overdraft or insufficent fees situation costs a bank between $2 and $3. The rest of that OD fee is pure bank profit.

Couldn't agree more. That's why I only use credit card for all purchases when possible.

With regarding to avoid bank fees. I always have 2 checking accounts at the bank. One for incoming money, another one for outgoing money. When I'm writing a check or schedule a billpay, I would transfer money to my outgoing account. This guarantees that I will always have enough money to cover my check or payment.

My credit union begs us to use our check cards as a credit transaction because Visa will be responsbile for processing the transaction, when it's used as a debit card, my credit union has the burden and expense of processing the transaction. My credit union also begs us to mail in our deposits instead of using other bank's ATMs to deposit money. I wonder how much more it really costs them when I deposit in another ATM...I'm not wasing 37 cents to mail in my deposit to risk it being lost in the mail.

theahnfahn said: I work in a branch and I'll give you two reasons why your bank wants you to use your debit card. First and foremost, the more services the bank is providing you the less likely you are to leave. If you become dependent on your debit card you will be less likely to switch banks and have to wait 10+ days for your new card to arrive. The other great thing about debit cards is that merchants take days to report purchases, merchants hold MORE than the transaction amount, and customers don't log debit card purchases in their check registers as often. The vast majority of my customers believe debit card purchases hit their account immediately. This is not the case. I'm estimating here but I'd say over 50% of our overdraft fees come from customers who made debit card purchases all weekend, called to check their balance, and then wrote a check that they thought would clear without an overdraft. If you log your debit card purchases in your check register this can all be avoided and I'll be out of a job...

This is company shill bs. Debit cards are for poor people and the semi-retarded. they were originally for people who couldn't get credit and the only reason that they are popular now is that they are opt-out rather than opt-in. There is absolutely no reason to use debit cards unless you are a financial moron. The month-long float on credit card purchases is reason ENOUGH to not use them, not to mention all the protections most good credit cards have that debit cards do NOT have (free next day replacement, return protection/breakage for 90 days, automatic 1 year extension of existing warranties, etc.) Furthermore, you are taking a 1 to 2 cent loss on every dollar you spend on debit cards if you use them because you are missing out on credit card rewards that are superior to the programs that are offered under debit cards, if they are offered at all.

razorweb said: theahnfahn said: I work in a branch and I'll give you two reasons why your bank wants you to use your debit card. First and foremost, the more services the bank is providing you the less likely you are to leave. If you become dependent on your debit card you will be less likely to switch banks and have to wait 10+ days for your new card to arrive. The other great thing about debit cards is that merchants take days to report purchases, merchants hold MORE than the transaction amount, and customers don't log debit card purchases in their check registers as often. The vast majority of my customers believe debit card purchases hit their account immediately. This is not the case. I'm estimating here but I'd say over 50% of our overdraft fees come from customers who made debit card purchases all weekend, called to check their balance, and then wrote a check that they thought would clear without an overdraft. If you log your debit card purchases in your check register this can all be avoided and I'll be out of a job...

This is company shill bs. Debit cards are for poor people and the semi-retarded. they were originally for people who couldn't get credit and the only reason that they are popular now is that they are opt-out rather than opt-in. There is absolutely no reason to use debit cards unless you are a financial moron. The month-long float on credit card purchases is reason ENOUGH to not use them, not to mention all the protections most good credit cards have that debit cards do NOT have (free next day replacement, return protection/breakage for 90 days, automatic 1 year extension of existing warranties, etc.) Furthermore, you are taking a 1 to 2 cent loss on every dollar you spend on debit cards if you use them because you are missing out on credit card rewards that are superior to the programs that are offered under debit cards, if they are offered at all.

I'm with you ^^. I work at Chase bank, and I do agree, all the people using debit cards that I see come in are very poor. Most of them are carrying double digit balances. Us employees (well, at least the financially responsible) don't even activate our debit card, and instead just keep an ATM card in our wallets, along with credit cards. Debit cards are great for our bank though, we rack in overdraft fees because people think if they reach a 0 balance that the debit card will be declined at the POS terminal.

True, I didn't want to get too technical but yes you are right. There are 2 types of Debit cards, ones with visa logos that act like a credit card which take a couple of days to post and the other straight debit cards.

isobro said: bhupeshm said: No, credit card companies do not charge the same fees for CC's as Debit cards. Debit card fees are a lot less. That's why you will see some places accepting debit cards but not credit cards. I think banks are pushing debit cards so that people have less cash in there accounts, potentially going below minimums, etc. and there is no risk.

Fact is that Citibank, MBNA, BoA, JPMorganChase issue most of the credit cards in the world so they are the ones monopolizing merchant fees. Other banks may be pushing debit cards and then later potentially pushing fees or trying to gain loyalty to their checking accounts.

This is semi incorrect. If you go to a grocery store and hit Credit for a Debit card, it will charge them (the grocery store) the same amount as if you were using a credit card. If you hit Debit for a Debit card, and enter your pin, it will charge them (the grocery store) less than a credit card.

Remember, the lawsuits?

hey, i don't mind using my straight debit card at all. i'm not poor, i'm financially responsible, i keep my checkbook (quicken) balanced, and i have 4 digits (sometimes 5) in there! i don't use it that often. usually to get Cash Back while at the grocery to avoid ATM fees, or use it instead of a check when the merchant doesn't accept credit card, or use it instead of cash for small purchases (less than $10).

i do NOT like co-branded debit cards though. those are the kind that can empty out your checking account (plus the overdraft protection) fast if stolen. it will also take some time (up to 10 business days?) before the bank will put the money back into your account. has anyone been through this type of ordeal before?

i feel safer carrying around a straight debit card where it can only be used by entering a PIN. for everything else, AMEX and mc.

sc0rpio said: . usually to get Cash Back while at the grocery to avoid ATM fees

Do you know that you can use Discover credit card to get cash too?
I use Discover only for that purpose otherwise Citicard pays me 5% at Grocery stores.

Facts:
1. Over 50% of all transactions are done a piece of plastic. Source: American Banker Magaizne
2. Interchange fees are cheaper for merchants on debit card transactions than those on credit cards
3. PIN based transactions are even cheaper for the merchant and less riskier for the issuing bank
4. Checks cost banks money to process and are inefficient compared to a card transaction. Even with Check 21, banks still have to capture images of checks.

Opinion:
1. Efficiency gain - why wouldn't a company want to operate smarter and improve margins.
2. Gain wallet share and increase customer loyalty... Again, Hmmm...
3. The ease of the transaction makes for sloppy record keeping from a small percentage of customers. aka Fee Income.
4. People who don't want to use credit still spend money. Banks lose many if you use a check, make nothing if you use cash, or make a little something if you use a debit card.... Again, Hmmm...

dawndelion said: My credit union begs us to use our check cards as a credit transaction because Visa will be responsbile for processing the transaction, when it's used as a debit card, my credit union has the burden and expense of processing the transaction. My credit union also begs us to mail in our deposits instead of using other bank's ATMs to deposit money. I wonder how much more it really costs them when I deposit in another ATM...I'm not wasing 37 cents to mail in my deposit to risk it being lost in the mail.

Making a deposit at another bank's ATM means that your bank has to pay $2 - $3 to the bank whose ATM you used. "Shared deposit" is the highest of all interchange fees (as compared to just withdrawing cash, which only costs your bank about 25 cents). It's no wonder why most banks don't even allow it, and some give out prepaid deposit envelopes.

EDIT: Source: http://www.atmmarketplace.com/news_story_12064.htm

"NYCE also is increasing its interchange rate, from $1 to $2 for on-premise shared deposits and from $1 to $2.25 for off-premise shared deposits."

"Like NYCE, Star's interchange rate for shared deposits will be $2 at bank branch ATMs and $2.25 at off-site ATMs."

"PULSE's interchange rate for deposit sharing is $2"

All your questions are answered here

adityanm said: Pakman0209 said: Debit cards are for poor people and the semi-retarded. they were originally for people who couldn't get credit and the only reason that they are popular now is that they are opt-out rather than opt-in.

With many banks they are not even opt-out.
I just opened a checking account with chase to collect $75 promotion and I told them that I did not want any debit card but the CSR found out that there was no option to open a checking account without debit card. Their on line banking cannot be used unless you enter ATM card #.
The same thing is true with Citibank online banking.

There is an easy way around this:
1. open bank account, grudgingly accept debit card
2. Day 2: request a "clean" ATM card, i.e. no mastercard/visa logo
3. Receive ATM card, destroy debit card.
4. Profit!

On a side note, maybe the OP can improve this thread by culling the facts/helpful sites (see mathfaster's post) into the original post. Who wants to bet some magazine comes out with an article titled "Why Debit Cards Are NOT For You" in the next few weeks