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We love our debit cards, but not our banks

Elaine Thompson / AP file

The recession served as a wake-up call for many of us to get a better handle on our finances, and for a lot of folks that meant replacing one piece of plastic, the credit card, with another, the debit card.

But now, regulatory changes have made those debit cards less of a cash cow for financial institutions. That’s left many banks scrambling to introduce new fees to make up for that lost money.

The problem: Consumers are dead set against the fees, and they don’t necessarily want to start using their credit cards again, either.

A new report from Javelin Strategy & Research finds that few have sympathy for the banks. In fact, 70 percent of the people surveyed for the report said they think banks are the ones benefiting from the new regulations.

Many expect the financial institutions to lose billions of dollars in revenue because the new rules limit how much money they can make every time a retailer swipes a debit card.

“Banks are looking kind of like bad guys lately, and I think it has a lot to do with consumers not really understanding what was going on,” said Beth Robertson, director of payments research for Javelin Research, which does research on financial services for financial institutions and others.

The survey of 3,000 people, conducted by Javelin Research in October, also found that about seven in 10  respondents are satisfied with their debit cards, which allow you to pay with plastic but draw directly from your bank account.

They don’t want things to change.

If their bank started charging them a fee to use a debit card, 32 percent of consumers would switch to cash rather than pay the fee. Another 26 percent said they’d switch to another bank, while 25 percent would use a credit card instead.

Some would go for an even more arcane form of commerce: 13 percent said they’d use checks instead.

“Because of what’s been happening with the economy (people are) really wanting to control their use of credit,” Robertson said.

Some customers may not be able to use credit cards more because they have lower credit limits than before the recession and credit crunch. Others may have found it easier to keep their spending under control if they use a debit card rather than a credit card, even if they pay the credit card off each month.

And others may find that they just aren’t getting as good of a deal on their credit cards, said Bill Hardekopf, CEO of lowcards.com. His research shows that the average advertised annual percentage rate for a credit card is now 14.05 percent, compared with 11.64 percent when the an earlier set of credit card regulations, known as the CARD Act, was passed in 2009.

That legislation limited how much banks can charge credit card users for things like paying late or going over their limit.

Of course, many big banks already tried to institute a straight, monthly debit card fee, and soon rescinded those plans when faced with broad and fierce consumer outrage.

But experts say that while consumer may have won the monthly debit fee battle, they should be prepared for other, more subtle fees to start sneaking up on them.

Robertson said banks also will try to figure out ways to market the new fees as new customer perks. For example, some may try charging fees for mobile banking, or creating a fee service for expedited online bill payments.

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