In Defense of the Debit Card

Jason beat me to the punch by blogging on charging fees for debit cards loaded with unemployment insurance benefits. Like Jason, I have always been puzzled by the use of debit cards given their high fee structure. Indeed, I wandered all around Midtown Manhattan last month in search of a proprietary ATM which I could use without being levied with those annoying charges, which hover around $4 per withdrawal lately. Nor is the EFTA approach toward losses due to fraudulent debit card use something that really survives any critical evaluation, in my view. So Jason and I agree there, I would bet.

I have found two super-fantastic uses for the debit card, and thus I must beg to differ with Jason that the payment device is all evil. They are:

1. Cash back at the merchant: You can use this (add on cash to your store purchase) to circumvent the nasty fees that the banks charge for simply withdrawing at a non-proprietary ATM. I survived a whole semester in South Bend, Indiana a few years ago without paying any fees using this debit card function, which with my bank is free. I would bet sooner or later this loophole will be closed. In the meantime I find it sweet to be cleverly manipulating my knowledge of the payment system to deprive my bank of $1.50 in fee revenue, which makes cash-back transactions even more delightful.

2. Foreign Exchange when Traveling Abroad: Any serious traveler who remembers the old days and trips to the American Express office abroad can tell you that this is the most amazing thing: Local currency is available with any Cirrus or Maestro-branded ATM with just a swipe of the debit card. True, you have to pay a fee, but generally it is no worse than those fees (and the bad exchange rates) for USD or traveler's checks. I have used ATMs from Kathmandu to Kunming, Prague to Perth, and each time I get local currency I swear it is the best payment systems invention in the last 50 years. My only advice is that before you leave, check the exchange rate and find out the local currency equivalent of the dollar amount you want to withdraw. That saves some jet-lagged confusion at arrival at the destination, trying to figure out exactly how much in local currency you should withdraw.

So, in every evil there is some good.