Most consumers have become serious about avoiding debt. Some have gone as far as cancelling credit cards and using debit cards for transactions. These consumers feel that by being unable to access anything except for what funds they have available that they are spending just what they need and nothing more.

Consumers are still feeling the effects of the recent depressed economic conditions. Debit card use is increasing in popularity. Consumers can now choose to use debit cards to access money directly from their bank accounts as tool for budgeting and limiting spending. Many consumers don’t have the luxury of choice as banks are less free in doling out credit cards. Debit card use is rising at exponential levels.

The banks are now incurring less risk of default but profits are plummeting since the interest charged on credit cards far exceeds the fees collected on debit card use. It will be interesting to see how banking continues to evolve as debit card use goes up.

Debit Cards: Banks Use Overdraft Fees to Make up the Difference

In response to the increasing use of debit cards banks have gotten much smarter. Debit cards used to be used and it took two days to process the transaction. Now transactions happen in real time and customers no longer have two days to make sure the cash is there to cover the transaction. Now banks approve transactions even if funds aren’t available but they charge much higher overdraft fees for debit purchases with some fees nearing $20.00.

Debit Cards: Debit Card Issuers Marketing Services to “Under-banked” Customers

There are about 80 million people in the US who don’t have checking accounts, savings accounts, or credit cards. Banks and debit card issuers are now courting these individuals through services like social security and payroll and their aggressive tactics are paying off. The government now issues social security benefits on debit cards and many companies are choosing to pay employees with debit cards as well.

As the services continue to evolve consumers may find they are no longer what consumers thought they were, a respite from debt and high fees. As banks continue to jack up rates, fees, and penalties consumers may seek out alternatives or companies may find ways of marketing alternative services to under-banked consumers. The rules are changing so rapidly with debit cards that consumers are having a hard time keeping up with the varied requirements.

It is highly doubtful that consumers will be able to return to cash only transactions. It’s quite possible that all cash transactions will be completely eliminated in the near future. Plastic is the new paper now and future transactions are most likely to be completed using credit cards, debit cards, or accounts synced to mobile devices and smart phones.

Debit Cards: Consumers Should Read the Fine Print

In all business transactions involving debit cards consumers would be wise in reviewing all policies the issuing company provides.