New Debit Card Fees Just a Ploy To Push Credit?
The Durbin Amendment kicked in on October 1st and now, the fees that retailers chuck over for debit card transactions are nearly half of what they used to be. There’s no doubt this cuts into a bank’s bottom line, but is that really the reason for imposing such excessive fees for debit card usage?
Bank of America sent a strong message when they announced their new monthly fee. Instead of levying a more palatable fee of just $1 or $2, they tell us it will be a big fat fee of $5… an amount so high, that it’s outright offensive. And guess what? I think that’s the point.
According to this recent ABC article, to justify the $5 fee, customers would need to be making 25+ debit card purchases per month, on average. Do some customers do that? Absolutely. But when you average out all their customers across the board, I think it’s safe to say that the majority have far fewer transactions than that per month. Conclusion? The $5 fee for everyone is far greater than the revenue hit BofA is sustaining from Durbin.
Here’s the real motive…
While the Durbin Amendment creates a convenient excuse to discourage debit card usage, the real motive is probably the fact that consumers now shun credit cards. When the recession hit, the number credit cards in circulation declined by nearly a fifth. Other sources peg that number even higher – as much as one-third – when you factor in store cards, business cards, and the like.
Furthermore, consumers appear to be using their credit cards more responsibly now. At the end of July, TransUnion announced that we made $72 billion more in payments than purchases. That’s nearly a $75 billion turnaround from five years ago, when consumers made $2.1 billion more in purchases rather than payments.
In a nutshell, credit cards aren’t exactly in vogue right now and banks are trying every trick in the book to change that...
Big Bonuses as Bait: I find it interesting that ever since Bank of America announced the debit card fee, they now prompt me with an “exclusive” offer for their Cash Rewards Visa whenever I login to my bank account. I’ve been a customer of theirs since 2004 and have never once been offered such a large bonus before, so the fact that they would all of a sudden bait me at the same time they announce the debit card fee? Definitely not a coincidence.
Excessive Advertising: I started my credit card forum/blog nearly four years ago (before the crash) and even back then, credit cards weren’t being advertised as heavily as they are today. Which I find ironic, considering the high unemployment… doesn’t that make this a riskier environment for lending?! It makes no sense they’re advertising them so heavily, with such large bonuses, in a time like this.
However, I think Senator Durbin himself sums it up the best. "They want to make debit cards more expensive," he said. "If they can push people away from debit cards into credit cards, where it's unregulated... they can make more money."
Good for some, but definitely not for all
If you’re someone who religiously pays their credit card in full and never overspends with it, then all these incentives actually play in your favor.
However everyone else needs to be careful. Even I can admit credit cards are a bad idea for many and my blog is dedicated to them! This spring Kellen wrote a post about building an emergency fund, in which she references an article that states a little over half of Americans have more in their emergency fund, than the balance of their credit card debt!
If you fall into that category, or you just have a tendency to overspend and carry a balance, then don’t fall for your bank’s bait of switching from debit to credit. Even if you stick with Bank of America, paying that $5/month for the debit card will be a lot cheaper than the finance charges on a credit card. But better yet, you can still keep using your debit card for free by simply switching to a smaller bank or credit union.
This guest post was written by Mike of Credit Card Forum. The reason he started a site all about credit cards was because he had quite the experience with them, when an auto accident at age 18 left him with all sorts of healthcare expenses… which wound up on cards. You can read more about his story from the link at the top of his blog.
October in Review
I'm laughing at myself now when I see that I thought I could save an extra $4,500 in cash by the end of the year. That would have been about $750 each month, starting in July. It has been four months of saving now, and I am almost at $1,000 of extra savings! At the very least, this exercise has made me more aware of how much money I actually have that is not budgeted for.
Extra Cash Flow - $257
Total extra cash saved since July: $968
In October my "extra savings" increased by $257. At the end of September, I was out $300 in reimburseable expenses from work, so essentially I had a $300 extra inflow in October that should have been attributed to September.
However, to offset this extra inflow, I managed to accidentally pay my student loan off by an extra $340! The student loan system switched websites this month, and I tried to make my usual extra payment as soon as I could log in. However, the system kept giving me an error message on the last step. I gave up, and logged back in the next week to complete the payment. THEN two payments show up on my account a few days later. Luckily I had the extra cash, and I'm fine with paying extra, otherwise I'd have been pretty upset!
Who are the Joneses?
We often use "Keeping up with the Joneses" to refer to the phenomenon of people spending more than they can afford in order to act like they have the same income as their neighbors. (Who are probably also spending more than they can afford.)
But keeping up with the Joneses is not just limited to overspending. We live in a competitive society, and it seems like we can also get competitive about frugality - or even going green!
This family made headlines for their zero-waste household. They produce absolutely no garbage, and only a small amount of recycling. Of course, we should all be so good to the environment, and yet the comments on this article show how angry people get at this family! Many commenters acidly point out that the family can only do this because they are wealthy, and one spouse stays at home (making their somewhat cumbersome grocery shopping process easier I suppose?) Some commenters suggest that the family is lying about their success, that their kids are just as consumerist as their peers, but wait until they're over at a friend's house to show it.
But really, if we all implemented just a couple of their trash-saving techniques, we would be doing the world a favor. No one is saying you HAVE to be like this family. Maybe you can't afford the stuff they buy package-free and all-natural, but no one is saying that YOU must, just because this family does. They are simply shining examples of the trashlessness that is potentially possible to achieve. The value in their story to you lies in finding the bits and pieces that you can adopt in your own life to reduce your trash a little bit.
But people get angry because they're competitive. They think because this family is 100% trash free, then they will be expected to achieve that too. When you think about it rationally, there's no reason to be upset with these people - if we all reduce our trash by 10%, we'd have a huge effect on the environment. If a family reduces their trash 100%, they make up for 9 of their neighbors NOT cutting trash 10%.
I see the same reactions to "extreme" frugality. For example, I enjoyed this post from Mr. Money Mustache outlining how to take into account all of the true costs of commuting. The points MMM brought up made me realize it is more worth it to pay more rent to continue to live close to work. After reading through the post once, I left with the realization that MMM had recommended biking to work if possible, but as a driver, that the rest of the article was still applicable to my situation.
Later, I stumbled across a post on another blog viciously attacking MMM's analysis of commuting costs. Commenters on this blog agreed that his advice was ridiculous, that he thought everyone should bike to work, that the advice was useless since most people don't want to show up sweaty to work.
But MMM never held a gun to your head and said "bike to work!" so what's all the fuss about? He had some good points on how people don't sit down and calculate exactly how much more their commute will cost for each mile they move further from work. Based on my reading of the post, again, I saw a set of ideas and tools that I could pick and choose from to apply or not apply in my life, depending on whether they would work with my lifestyle. So why do people get so angry?
Again, I think our competitive natures cause us to lash out when we see someone else living the dream of early retirement - when we get their advice on how they manage it, and find it's not what we want to do, we try to attack THEIR lifestyle and ideas.
Do you find yourself resenting frugality bloggers for being able to bike to work when you can't? Do you feel guilty for not being as green as your neighbors are? Who are your personal Joneses? Who are the people you try (perhaps too) hard to keep up with?
Is the future of budgeting on the iPad?
This is a guest post by MoneySupermarket.com
It is difficult to overstate the importance of the technological legacy left by Steve Jobs given that he created several products that have revolutionized existing industries or, more often than not, created markets under their own steam.
The Apple iPad, launched in 2010, was a surprise hit because many assumed a tablet that resembled and behaved like an oversized iPhone would not find an audience.
With millions of units sold and hundreds of copycats proliferating, it is impossible to see the iPad as anything other than a roaring success and in many arenas, from education and business to personal finance and entertainment, it is having an impact.
What makes the iPad special is the growing library of applications designed exclusively for it, covering a diverse array of functions from practical apps designed to help you apply for financial products like online loans to creative apps that are used by pop stars and budding musicians to craft new songs.
The iPad is having a clear effect on the way in which people are managing their finances because with a variety of inexpensive or free applications you can easily create a monthly budget, pay your bills on time and make your cash work for you with online loans and payment card applications.
What makes the iPad a more convenient platform for budgeting than say, a laptop, is that it is considerably more portable without being drastically more expensive.
In addition, the most popular budgeting apps follow the Apple ethos of making the interface as simple as possible without compromising the power of the tools put at the disposal of the user.
For example, Budgets for iPad is one of the most frequently downloaded free budgeting apps created for the Apple tablet.
It is so popular because its graphics take advantage of the high-resolution 9.7-inch display of the iPad and it uses approachable graphics, graphs and charts to illustrate the state of your finances in a manageable manner.
In its free form you will have to deal with advertisements, but you can also invest in the paid-for edition to remove these minor annoyances.
Budgets for iPad lets you input all of your income, outgoings, bills, savings accounts, credit cards and online loans into a single application.
You can then track when payments need to be made, how much disposable cash you have available and how you can appraise the overall health of your budget.
You can export your finances from this app and many others in a variety of formats, from spreadsheets to web-friendly HTML, so it is suitable for both business and personal users.
In the past, it would have been necessary to keep endless paper records up to date, but by using the iPad, you can manage your finances and make alterations within a few quick taps, freeing you up to get on with more important things.
Other popular iPad compatible budgeting apps include iXpenseIt which helps you track what you have spent and makes it easy to claim for any business expenditure, although this is designed for the iPhone and so lacks the graphical sparkle of full iPad apps.
The flexibility of the iPad's software and hardware means that it is simple to see how your financial affairs are doing on a minute to minute basis, helping you avoid fees for late payment of bills or exceeding your overdraft. This makes Apple's tablet an invaluable tool for those who want to balance the books in the modern era.
How much money is enough?
Win $50 - this is the final prize in AccountantByDay's series of October giveaways. Click here to enter.
-------------------------------------------------------------------------------------------------------
It doesn't take much to make a dog happy
How much would your annual income need to be before you feel "comfortable"? How much would it need to be for you to feel rich?
Ironically, some days I feel more rich than comfortable. I live with roommates that make a lot less money than I do, and I don't have the money shortages they do. But I think I would need to spend five times more on rent to really feel "comfortable" about where I live.
I could go out tomorrow and pay two times as much for a nice, quiet one-bedroom apartment, still close to work. But I have a dog, and in order to both live without roommates AND have someone to let the dog out, I'd want to rent a house with a yard, plus have enough money to pay for someone to take the dog on an afternoon walk (since busy season requires being away from home for over 12 hours a day quite often.) Being able to afford that would make me feel comfortable.
October First Anniversary Giveaway – Week 4
This is the FINAL GIVEAWAY celebrating the first anniversary of AccountantByDay. This week features a $50 Amazon Gift Card prize. Please use the RaffleCopter widget below! Good luck!
If you're a new reader, start here:
October Giveaway Winner Week 3
After looking through 134 entries, the winner is Deborah. Congratulations! Look for your $75 prize arriving in your inbox any minute now!
Other giveaways to enter now:
- My Personal Finance Journey is giving away $205! ($105 straight to readers, the other $100 to your favorite charity.)
- Frugal Toad's Fall Giveaway - win $50
- 20's Finances is giving away a $50 gift card
- Investorz Blog is giving away $25
- Money is the Root is giving away $25
- Invest it Wisely is giving away some wise advice - In Defense of Food
- CoupleMoney is giving away a Tablet
Review of 3rd Giveaway
I listed the giveaway on Online-Sweepstakes again, with many more entrants than last week's, although not as many entrants as the first give away.
Giveaway visitor stats:
(Visits) [Page views]
0. Week before any giveaways (736) [2,194]
1. Week of first giveaway (996) [3,295]
2. Week of second giveaway (776) [2,416]
3. Week of third giveaway (926) [2,964]
The total number of visits this week still do not rival the visits in the first week of the giveaway, but the increase from week 2 to week 3 is 150 visitors, but the number of visits driven through Online-Sweepstakes.com is only 108 in week 3, so at least 42 of the new visits seem to have been generated through other means.
My alexa ranking has been hovering around 250k since the contest began. I've seen it at 248,000 - today it is at 253,000. So the giveaway gave it a poke, but I'm not sure if it has sticking power.
Thanks for participating, and look for the next contest announcement on Monday!
Life of an Auditor: Scheduling Audits
This post is part of a series where I write about the daily life of an auditor, based on my own experiences, of course. I am getting ready to start my second busy season. There is always so many new things to learn!
Things have been pretty quiet around here after some recent deadlines. However, audit season begins in January, and before then we have all kinds of planning work to get to.
In my first year, I was not very involved with audit planning, even though us first years began on October 1st. This year I have 3 clients that I will head to during November and December for preliminary audit work. I should also have some extra inventory counts this year, since I have been asking around if anyone needs someone to count inventory. (Yay, more billable hours!)
Setting professional goals: planning your career
Enter this week's giveaway for a chance to win $75!
-------------------------------------------------------------------
We recently had our annual reviews at work, and as part of the process, we were asked to set some goals for the upcoming year. By all accounts, these goals are not really followed up on by management, but I put some thought into my goals anyway, because they're MY goals and it's MY responsibility to follow up on them.
After setting my goals, I thought I'd share some tips on setting your own goals, whether it is for your annual performance review, or just for your own benefit.
Setting professional goals forces you to think about your career, and to broaden your view from the here-and-now, to the future. You may be scrambling to do all your work well in the moment, but take a minute to think about 5 years from now, or 10 years from now, and what you need to do to get where you want to go.
Maybe just doing your work each day isn't enough. Maybe you need to become involved in the community, find new clients for your company, seek out training events that you can attend, and then teach your coworkers about.
Figure out what your overall objective is first
Is your goal to make partner in the next 10 years? Is your goal to move into more of a business development role? Do you want to specialize in one industry?
Before you can set your goals for the upcoming year, you need to put some thought into your ultimate goal over the next 10 years. (Or 20. Longterm. However far ahead you think you can handle.)
If, deep down, you don't plan to make partner, then your annual goals now may be completely different. You don't need to point out to your boss that you are not attempting to make partner, of course!
Some of our former employees were interested in part-time work when they became parents. They handle monthly bookkeeping for some of our clients now, rather than working for us full time doing audits. It would also be possible to transition to working as an individual tax accountant - but our firm does more corporate taxes, while an individual practitioner would likely handle more individual and partnership returns.
Even if you don't work in accounting, you can still apply this to the job you are currently in. What direction do you want to go in from where you are now?
Figure out what your short term objectives are
Okay, now that I have set my long-term objective, I can figure out some short term objectives are.
Let's say I picked the "partner" route. I'm going to want to make sure I'm assigned to some of our biggest clients, I'm going to want to network with other people at the levels in between me and partners. It depends on your firm what other objectives you might have.
Set goals that will help you achieve those objectives
You can't just set your goal to being assigned to the biggest client - you need to set goals that will help you get there. Maybe you'll attend an industry conference, to gain more knowledge about that client's industry in the upcoming year. Maybe you'll check with managers on that project first every time you're out of work to do during the year, and then make sure you do that work promptly and well.
At this point in the process, you are figuring out the actual steps you can wake up and do every day that will help you achieve your objectives.
How I applied this to my annual review
I set a goal to learn how to do a particularly tricky type tax return well - and then I laid out steps I can take to get there. I will read the regulations referenced in the form instructions. I will find a good example of how to do the return properly, and study the example. I will actively ask for more of this type of return to practice on.
I also set a personal goal to work more efficiently; I want to get my chargeable hours in and go home earlier this year. This is not a goal I shared with my boss, because I don't want to suggest that I haven't been using my time efficiently already... but that doesn't mean that I can't set it as a goal for the year anyway!
Your annual review
Does your employer have you set annual goals? Do they follow up on these, or leave them up to you to keep track of? What were your career goals this year?
First anniversary giveaway – Week 3
This week I will be giving away $75 again. If you are the winner of this week's giveaway, you will win:
- $25 Amazon Gift Card
- $25 Amazon Gift Card from Maximizing Money, "Stretching Your Money to its Maximum Potential." MaximizingMoney.com provides a wide variety of bonus offers, promotional deals, and special savings.
- $25 Amazon Gift Card from Write and Get Paid, a blog that teaches you how to get paid for freelance writing work.
If you are a new reader this week, please start here!
How to enter the contest:
IMPORTANT: If you entered last week’s give away by liking on Facebook, following on Twitter, or subscribing to the RSS feed, these will count as entries again this week, but you MUST post a comment here saying that you have done these things in order to get counted for this week’s give away.
You can enter the contest by doing any or all of the following tasks, and leaving a comment saying which tasks you have completed:
1. Like the Accountant by Day page on facebook (1 entry)
2. Follow KellenABD on twitter (1 entry)
3. Subscribe to the Accountant by Day RSS feed (1 entry)
4. Support a sponsor – leave a good, thoughtful comment on a post at Maximizing Money, and link to the post in the comments here. (3 entries) – I get to decide whether your comment counts – the key will be to show that you took the time to read the post and respond with something meaningful and relevant that adds to the conversation.
5. Support a sponsor – leave a good, thoughtful comment on a post at Write and Get Paid, and link to the post in the comments here. (3 entries) – I get to decide whether your comment counts – the key will be to show that you took the time to read the post and respond with something meaningful and relevant that adds to the conversation.
Contest entries close at Midnight EST on Friday, October 21th. Good luck!
Follow Us!
Sponsored
Sponsored
Personal Finance Blogs
- Cash Flow Mantra
- First Gen American
- KrantCents
- Little House in the Valley
- MoneyCone
- My Journey to Millions
- Retire by 40
- Thousandaire
