copyright 2009 Bettina Network, inc.

This is a follow-up on Bettina’s Hall of Shame award.

We are beginning to think this award should be shared by the banks and the media.  The more we read the more we understand that the American public is being grossly misled and it is either because the reporters are ignorant of their subject or the reporting we’ve read is a purposeful attempt to mislead the public.

There has been much obfuscation around Debit Cards.  Much has been said and brought to Congress about how awful the banks are to give an automatic coverage of overdrafts for those with Debit Cards and how that automatic coverage allows the holders of these cards to overdraw their accounts and how it is allowing the banks to take them to the cleaners.  That is not true.  The public IS being taken to the cleaners, but its lack of knowledge and sophistication on how these things work allows this gross miscarriage of money which takes place on a daily basis.  And now the public is being misled by the media as to the real problem around Debit Cards.

Why did Debit Cards come into being?  It is another way the middle class can be drained of its money. Its a quick way to move money from the super rich to the becoming poor.

What’s wrong with Debit Cards and why this automatic overdraft business is gaining so much attention?  Its simple.    It is a red herring, meant to take your attention away from the real problem so Debit Cards can become entrenched in this society as another structural element within the banking system which makes loads of money for banks by quickly taking it away from the Middle Class.

The banks don’t want you to wake up to what they are doing.  So, you get this righteous indignation to take your attention, time and resources away from seeing and objecting to the real problem with Debit Cards.

When the Debit Card phenomena becomes accepted and normal the overdraft coverage will stop and you will be ripped off in ways you can’t even begin to imagine.

HOW DO DEBIT CARDS WORK?

Today, when you make a purchase with your debit card, the money is immediately taken out of your checking account.  Sometimes this happens the same day.  If you make a purchase in the evening – say about 8pm, the next morning your checking account shows the withdrawal.  It is a total and immediate movement of money from you to the bank.  The merchant from whom you made the purchase doesn’t get their money for two to three business days later – so you are out the money paid, the merchant is out the merchandise or services without payment for two to three business days and the bank has the money, which is supposed to be the merchants, which the bank keeps for two to three business days before sending it on to the merchant involved.  And the merchant gets to pay the bank from 2 to 3 percent in the form of an immediate discount, for this service.

Parallel that to what happens when you make a deposit.  In most cases, your deposits are “cured” by the bank for 5 business days before a deposit goes into your checking account as available funds.  So any money which you have deposited into your checking account which you put there to use for such purchases can’t be touched for five business days.  (Only a few are exempt from this and then only temporarily until the bank can conjure up ways to put those few back with the unwashed – those who you now feel better than because you are one of the select few.  That feeling of superiority is short-lived because your stay in that heavenly area is temporary and the bank is constantly working with its idea people to shrink the number of people in that heavenly area and to decrease the amount of time they can spend there.)

Now, you’ve made your deposit and two days later you go to the store to make a purchase using your debit card thinking you have this money in your account and available.  What a mistake!  You are now in the weeds.  If you counted on that deposit to be there and usable you find you have overdrawn your account and are now being charged between $30 and $40 for that Debit Card transaction.  So without the automatic overdraft account added to your checking account, the purchase you made with your Debit Card would have bounced; you would be embarrassed at the check-out counter of wherever you are; and you would be furious with the bank doing whatever you could to change the situation.  What change would you be looking to make?  You want your money available when you make your deposit – or at the very least within two days of your deposit.

Instead, your bank covers the purchase, charges you an obscene overdraft charge and leaves you feeling as though this was your fault.  Was it your fault? NO NO NO!  You deposited good money and good credit for that amount should be immediately usable by you, especially when you think back on the fact that the merchant isn’t getting paid for two to three business days.

In addition, even if the bank bounced your Debit Card you would still be in the weeds because banks charge you the $30-40 no matter whether they pay the charge or not.  And with all the fees they add on to your account, you never quite know your balance.  You can call the bank at 2pm and get your balance – at 3pm they can add a charge which reduces your balance, you try to make a purchase for the amount you think you have and voila, you discover you are overdrawn or your charge has been declined at the store.  In either case you are out $30-40.

So what have we here:
1.  You start the action by making a deposit to your checking account.

2.  You go to the store to make a purchase.

3.  Your purchase is immediately registered by the bank – they have their money as soon as you make the purchase.

4.  The merchant is out the goods or services and the money.  The Merchant waits 2 to 3 business days before getting paid for what you purchased and paid for days before.  In addition, the merchant pays the bank about two to three percent for this service.  The merchant pays that amount to the bank, not in the form of a check issued at the end of the month, but in the form of a discount immediately taken from the Merchant by the Bank.

5.  You don’t yet pay for your Debit Card.   – in some cases you are being charged for this service – but most are not and given a little time you will also pay the bank a percentage to use your own money.  Congress will intervene on your behalf, but not for decades.  Meanwhile the bank will have another scheme going to replace the Debit Card income which will make billions more.  like the Debit Card gradually replacing the Credit Card.  Credit Card limits are being reduced.  They will finally go out completely.  Why take something that only pays you $ .95 on the $1.00 when you can replace it with something which pays you $1.50 on the $1.00.

Who benefits?  the Bank!  What is your alternative?  Use your check book.

Write a check for the goods or services you want.

If you have to wait in line with lots of people waiting behind you, that isn’t your problem it is the merchants problem.  You have your check book and proper identification.  There is no reason for anyone to deny your check, especially since there are all kind of services merchants could subscribe to which lets them know if your check is good.  They have been brain washed to believe that every check given to them by their customers is going to bounce so they had better use the Debit Card route for their own protection.

WHAT THEY DON’T KNOW, but will soon find out is the Debit Card they accepted can be rejected by the bank even after they have received an approval code.  The fine print in their contract says the approval code is temporary and can be withdrawn.  So what have they gained by accepting your Debit Card instead of your check? They have gained the right to wait for their money and to pay the bank a percentage of your purchase to accept your money and let it “cure” and then pass it along to them.

You have given up control of your money to the bank when you have and use a Debit Card.  When you use your checking account, you write a check today to pay for your purchase.  The money is withdrawn from your account about two days later and it hasn’t cost you anything.  If you overdrew your account by writing the check you can make a deposit the next day to avoid overdraft charges, which would have immediately accrued to your account had you used your Debit Card instead.

What has the bank gained?

Your deposits to your checking account for five business days for nothing –
money they make money on.

They have in addition gained an additional two to three days use of the money because you authorized the bank to withdraw money from your account to pay the merchant and while the bank has its money immediately, they don’t pay against they money you have given them for two to three days when the Merchants bill comes due.

The bank has gained use of your money in three ways, making substantial amounts when you add together the numbers of people who give them this right of access.
You are left penniless,
the merchant is left struggling
and the bank is just as happy and rich as it can be.

From what we have seen in the economy of late, the bank isn’t keeping that money.  It is being passed along in many schemes to the super rich.  Ethics have been suspended.  If the banks have to torpedo the society in order to create and work through its schemes – so be it as long as they are left functioning to continue this enormous transfer of wealth.

We are creating a modern version of the Emperor with his well-off minions and his indentured servants.  You may not yet be the indentured servants, but quite possibly that is the future of your children.

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