Bank of America and Others Charging for Debit: Time to Use Cash?

on October 08 2011 11:50 AM

U.S. financial regulation is capping fees banks can charge merchants for debit card usage.  In response, Bank of America and several other large banks have announced their plans to charge consumers to make up for the losses. 

Many customers, however, are outraged.

“Start charging me to spend my own money and I am leaving the bank!” complained a commenter on Bank of America’s Facebook page.

Switching to credit cards is one option, but miss a payment and you’ll be hit with fees.  If you lack self-control, you may also find yourself in debt and stuck with big interest expenses.   

Cash, on the other hand, may deserve a second look.  

Cash usage has declined in the last several years.  According to the Federal Reserve, noncash payments increased at a compounded annual rate of 4.6 percent from 2006 to 2009. 

Cash, however, has its advantages.

One argument is that people spend less money when using cash versus plastic cards because seeing money physically heightens its perceived value.  Moreover, the inconvenience of carrying and retrieving cash may limit impulse purchases.

This study and this anecdotal story support that argument.

“A buddy of mine made $20,000 in one day on the stock market, but he didn't sell out the next day and lost everything…I am pretty g------ sure that if he had that $20,000 profit in cash, in his hands, that he could touch, he would have sold out quickly,” wrote Mr. Mafioso, a popular anonymous columnists for AskMen.

Mr. Mafioso claims there is another benefit of using cash.

“When you pay for things with cash, it shows people that this guy's got money , he is successful , he is powerful and most importantly he knows what he wants… It's a simple thing you can do that will impress the pants off of anybody,” he wrote.

 

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