Back to cash

I admit it--I got lazy. The debit card is so easy to use, so convenient, such an elegant solution to the credit card versus cash dilemma. Fewer trips to the ATM, less fumbling around with bills, all that mess. Even though I griped about the Visa commercials that mock cash users as some throwback to an ancient age who mess up the machinery of commerce, I'd bought in to the ease and convenience of the debit card.

I repent.

First, let me explain the terms. "Debit or credit" is a misleading question. While all the plastic in your wallet looks the same, most of us carry around three different ways to pay: a regular credit card, a bank/ATM/debit/cash card that can be used with a PIN code to buy things at retail stores (PIN-debit transactions) and a bank/ATM/debit/cash card that can be used with a signed slip to buy things (signature debit). It's the last two we're concerned with here.

Why would banks impose PIN-code fees? After all, PIN-based transactions are more secure than the signature-based form, as the 4-digit code provides another layer of verification that the true cardholder is using the card. U.S. Bank isn't the only bank that charges some consumers to make PIN-debit purchases. Wells Fargo charges a static $1 monthly fee to PIN-debit users. If it seems like these banks are pushing customers to sign receipts rather than enter PINs, well they are. That's because they stand to rake in more money from signature debit -- up to seven times more.

Remember that banks skim a bit off the top for every transaction paid with plastic. Numbers are hard to come by, but here's an example: Gartner's Avivah Litan says a bank will take in perhaps 20 cents from a merchant for a $100 PIN-debit purchase, but $1.48 for a signature debit purchase in the same amount. In general, banks can make up to 50 cents on PIN transactions, with the fee capped. But banks can rake in up to 2 percent of signature-based transactions, a potentially huge haul.

So Heidi is paying a quarter for each purchase because U.S. Bank really wants a bigger cut of her purchases, an explanation that left her unsatisfied.

Now I knew that local stores prefer if you use a PIN instead of signing because it costs them less, but this is the first time I've heard of a bank taking a chunk out of your ass in order to make that choice, and it reminded me that I don't like paying banks in the first place, and if I have a choice where that money's going, I'd rather the owner of the pet food store or the local restaurant get it than the financial institution.

I won't be exclusive--I'll still use my debit card at the grocery store and when I'm buying gas, because the convenience factor is big enough, but I'm planning on carrying a bit more cash around now. No more three dollar debits for a bottle of water and a cup of coffee. And if my bank decides to start charging for this kind of stuff, I'm finding one who won't. It's a deal breaker for me.

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