Using Debit Purchases Saves big Money in 2021

Do debit purchases save big money save in 2021? Are you ready to find out how?

How does the cost of a debit card compare to credit-use on a debit card? How can debit purchases save big money on every transaction you make in 2021 and beyond?

In the early 2000s ATM fees ranged from $1.50 to $2.50 and many individuals learned how to avoid the charges by getting additional cash with grocery purchases. Then there was a time period when banks and credit unions charged a fee if you used your ATM pin number more than a certain number of times per month.

During this time period many Americans were conditioned to use credit and not debit at the grocery store. Well it seems that now more and more merchants may be asking shoppers to return to using their debit pin number because it costs a lot less than a debit-card ran as credit.

Purchase Fees Attached to Using Debit or Credit Cards
Comparing The Debit Purchase and The Credit Purchase
Using Debit Purchases To Reduce Merchant Costs
Debit Fee Reform Could Cause A Consumer Pinch
Debit Purchase Risks: How Much Do We Really Save
Credit And Debit Transaction Fee Increase Delayed Until April 2022
Credit Card Network Convenience Fees Limits Help Us Save
A Few Ways To Save On Debit Purchase And Convenience Fees

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Purchase Fees Attached to Using Debit or Credit

As consumers we determine how we spend our cashless money. Many of us swipe our debit cards without much thought about the costs to merchants. However, the new pandemic era has many of us thinking about how swipe fees affect us as consumers.

Did you know that the January 2013 court settlement gave Visa and Mastercard the ability to add a surcharge to credit purchases? Even so many of us have experienced and become accustomed to the surcharge fees during our shopping experiences. Nonetheless, these little 2% to 3% service charge fees begin to add up when we swipe our debit card.

What is the difference between the debit-card-debit purchase and a debit-card-credit purchase? Is there a time when it seems more feasible to use the debit-card-credit purchase?

When we make a swipe, we have the choice of debit or credit. The debit purchase is an offline transaction. The cost of the transaction, is the “interchange fee” which is usually 2% to 3% of your total purchase. The interchange fee is charged to the merchant where you swipe your card, not to your bank or credit union.

Comparing The Debit Purchase and Credit Purchase

debit-card-debit purchase

Processed offline through a digital credit card network
Less expensive to retailer/ little or no additional cost passed on to you
Consumers enter their pin number
Limited cash withdrawal offered
Immediate funds withdrawal within minutes of your purchase
Danger of stolen pin fraud

debit-card-credit purchase

Processed online through an electronic funds transfer (EFT) system
More expensive to retailers/ higher or additional cost placed on a purchase
No-pin, sign as a credit purchase
No additional cash withdrawal available
Funds held for purchase, withdrawn within 2-business days
No pin fraud dangers

Using Debit Purchases To Reduce Merchant Costs

If purchase fees are be added to merchants, why and how could consumers help keep costs down for merchants?

It seems that using debit purchases whenever possible helps reduce the costs acquired in our cashless society. We all know that helping our favorite merchants keep prices low in turn helps us spend less at the grocery store, for clothing and on gas. Although the above actions help reduce inflated purchase costs, the laws governing debit purchases have helped even more.

debit fee Reform could cause a Consumer Pinch

In an effort to manage the interchange fee, a reform was established under the Durbin Amendment in 2010. The reform requires the federal reserve to review and reform debit card transaction fees. The cap which was originally set around $0.12 per transaction in 2010, has now evolved into about $0.24 per transaction, according to the Federal Reserve 2018 report.

Consumers could feel the pinch caused by transaction fee reductions through the loss of financial perks such as:

free checking
high yield checking accounts
increased ATM withdrawal fees from out-of-network-banks

Surely we are all looking for ways to make a credit card profit, and the loss of these perks could hurt some consumers. However, we must weigh the costs that falls on us as consumers. Likewise we must determine which of the two (debit or credit) transactions poses the least amount of risks to our financial security.

Debit Purchase Risks: How much Do We really Save

We all know that helping our favorite merchants keep prices low is important and in turn helps us spend less money. However, we must also recognize that the same debit purchases that save us money in 2021, could also put us at risk for scams through the following situations:

pin fraud which gives direct access to checking and savings accounts
hidden recorder devices at gas stations
pin data breaches
fund losses up to $500. for unrecognized transactions after a 60-day period

We all want to help our neighborhood merchants and other small business save money so that they can pass those savings on to the consumer. Nevertheless, the debit purchased item may not be as big of a money saver as we originally thought. Basically, the purchase may not be as safe as we might think when we look at both sides of the coin.

What is the other side of the coin? If we are making debit purchases and our pin number is stolen in any of the situations above, we probably will not save any money.

Credit and Debit Transaction Fee Increase Delayed Until April 2022

Yet, another side of the coin in the cost of debit-card-credit purchases is that Visa and Mastercard are able to charge an astronomical price for each transaction. It seems that Senate Judiciary Committee Chairman Richard J. Durbin, D-Ill., and Representative Peter Welch, D.-Vt. wrote a letter to the two credit card giants in March 2020 requesting a transaction fee delay.

Likewise, they recently wrote another letter (March 3, 2021) requesting another delay because of our efforts to help the economy recover. According to a Bloomberg article posted on March 16, 2021, Visa and Mastercard agreed to delay the fee hikes for another year, until April 2022.

Although the delay is geared toward merchant fees. Eventually, the fees will be transferred on to consumers. Nonetheless, while this delay gives merchants time to recover, should consumers also review the potential for an increase in convenience fees?

Credit Card Network Convenience fee Limits Help Us Save

Convenience fees are the additional fees that the credit card company charges when you purchase an item from a store, gas station or individual sales person. Some merchants require minimum purchase amounts to offset the convenience fees. Since we know that convenience fees are probably here to stay, what has Visa, Mastercard, American Express and Discover done to support the consumer?

Accordingly, the credit card network agreed to allow convenience fees on credit cards and debit-card-credit purchases with the following limits.

Visa requires that the customer is informed of the fee before the purchase. In this case the charge is a flat rate rather than a percentage.

Mastercard allows convenience fees from any business regardless to it being a credit or debit purchase item.

American Express requires that the customer be informed of the convenience fees and that they have the option of cancelling the transaction.

Discover does not have convenience fees, but request that that all credit cards be treated the same. (For example: per thebalance.com) One business is not allowed to charge a fee for Discover credit cards transactions but not Visa transactions.

A Few Ways To Save On Debit Purchase and convenience Fees

How can we reduce our expenses and avoid convenience fees?

Below is a list of ways to make payments that do not include the use of either credit or debit card transactions.

Use cash instead of debit or credit
Use checks or money orders for mail-in payments
Use direct pay from online checking accounts when possible
Use over the phone payments directly to the company
Make payments at the centers when available

Conclusion

We began with the question concerning the use of debit purchases being a big money saver. We stated why some individuals may use credit on their purchases instead of debit. Then we made a comparison between debit-card-debit purchases and debit-card-credit purchases.

Next we continued to discuss the interchange fees that are attached to credit card purchases. We included information concerning the credit card reform act that limits the amount of fees attached to merchants. Our discussion stated some of the dangers associated with debit card use.

We moved forward to concerns about a scheduled Visa and Mastercard interchange fee increase and its movement to April 2022. Finally, we stated information concerning convenience charges that are attached to both credit and debit purchases.

Resources

Board of governors of the Federal Reserve System https://www.federalreserve.gov/paymentsystems/regii-average-interchange-fee.htm

Choosing debit vs credit with a debit card https://www.thebalance.com/debit-or-credit-315293

Offline Tranactions https://investinganswers.com/dictionary/o/offline-transaction#:~:text=When%20you%20pay%20for%20goods%20or%20services%20with,transactions%20are%20processed%20much%20like%20credit%20card%20transactions.

Regulation of debit interchange fees https://fas.org/sgp/crs/misc/R41913.pdf

Surcharging Credit Cards- Q & A for Merchants https://usa.visa.com/dam/VCOM/download/merchants/surcharging-faq-by-merchants.pdf

What are credit card convenience fees https://www.thebalance.com/can-businesses-charge-a-credit-card-convenience-fee-4155333