Saturday, March 14, 2009

Evil Debit Cards and Unemployed Victims

Rarely would a story about payment devices make the marquee on CNN.com, but this story has moved from the money section to the front page . . . presumably because it's so outrageous. Some states are apparently foisting upon their unemployed citizens the fee-ridden abuse of debit cards. Want your money faster (don't we all?!), accept benefits on a pre-loaded debit card--sounds attractive. I doubt the states tell their UI benefit applicants about the dark underbelly of this device. Fee revenue is now the center of the card payment world. States allowing banks to impose these fees (sub silentio) on their hapless unemployed citizens is almost as bad as Bobby Jindal rejecting an increase in UI benefits for Louisiana citizens from the feds!

A bit of good news: for the first time, my poll of my Payment Systems class revealed that fewer people use debit cards rather than credit cards, and those who do have a good explanation--banks require at least 6 debits per month to waive the account maintenance fee for their "free" checking accounts. Death to debit cards and the crappy EFTA and Reg E consumer non-protection regime!

7 comments:

Anonymous said...

Personally, I don't really think anyone who is getting money without working should be complaining about anything.. In all these cases, the "victims" have a way of getting their money without paying any fees. If they use that bank's ATM machines, they will not be charged a fee. Or they can always request a check rather than an ATM card. People are charged a fee for the "convenience" of accessing their money wherever they way, however there are ways to access their money without fees.. So if these people are too lazy to go to the banks ATMs they have no one to blame but themselves.. If they really don't like it, just stop collecting unemployment.

Mike McDermott said...

This is called "predatory lending" and has been carefully refined by political contributions to Congressmen/women by the banks, and who then willingly turn their heads and look the other way.

Anonymous said...

Let's think about it. We can be smart consumers and read the fine print of the fees attached to the debit cards. No one is forcing a participant to chose the debit cards. Reading the fine print before accepting into any agreement, either debit cards or mortgages with adjustable rates, we need to acknowledge some responsibility of the consumer to be financially responsible. But again, who are we kidding?

Anonymous said...

So let me get this straight: An outrage about fees... on money that is given to you for free? Is this CNN article serious?

As previous posters have said, if the debt card is so backhanded, don't use it.

If your looking for outrage; how about a story on how money from productive citizens is given to unproductive citizens against their consent.

Jennifer Martin said...

At least two problems arise from these "debit" payments. First, making money available more quickly to those who need it because they are out of work is bound to be a big draw. Perhaps not a bad idea, if not for the fees. Second, the fee issues create problems of disclosure of fees that catch the unsuspecting user only after they incur the fees.

Additionally, I also wonder if there are issues of overdrafts on these cards. For instance, debit card holds (ie. for gas purchases) can result in overdrafts even if the money is actually there. Will these debit cards result in the standard $34 overdraft per transaction fees for the unemployed which will be charged against their next unemployment payment? I bet so. There's a lot of money to be made by banks on debit card fees. This is not a good benefit for the unemployed. Just a trap for those with less money, who are the most likely to incur the overdraft fees.

Levi said...

Here's a novel idea, how about people start taking responsibility for managing their money. Overdraft fees are entirely avoidable even on a tight budget. A previous poster mentioned debit card holds for gas station purchases. These are holds for $1.00 only and drop off after 2 days. With the right system, as many responsible institutions have, the hold is wiped out by the actual charge so there is no overlap. The majority of problems arise from people not tracking their balance on their own and relying on the banks or ATM to tell them how much money they have. Sometimes merchants don't batch out their machines, which causes delays of up to two weeks in the actual charge coming through. When this happens, the temporary authorization "hold" drops off making it appear that the person has a higher balance than they actually do. Again, this is all easily solved by simply keeping track of how much money you have yourself. Too many people are too eager to blame thier problems and ignorance on others rather than taking a little personal responsibility. I definitely don't propose that someone be kicked when they are down, and these fees (while totally commonplace in the banking world) may feel like a kick, I also do not believe that there is anything actually wrong with the fees. Banks are a business that provide a service. There are some that provide more services without fees. Try your local credit union, they are less likely to charge you a fee to speak with a representative, access your balance, or take advantage of other convenience services. Unless we all demand better, and shop smarter for our financial services the fee based providers will continue to dominate the market.

Anonymous said...

Two points. First, you assume the states are not telling their UI benefit applicants about the fees. Why? What is the basis for your assumption? Are the fees less sinister if disclosed beforehand? Second, fee revenue has been a large part the banking world for some time now, hasn't it? As the banking world moves further away from the old way of doing business and further into electronic and automated payment systems, doesn't it follow that fees will go the same way? Unless you're just opposed to banks charging fees for services, opposition to fees for debit card services is just silly.