Post Bankruptcy Survival: Are Checks, Debit Or Cash To Your Benefit?As the banking industry is poised to lose $10 billion in overdraft and merchant fees, some banks are looking to tack on fees to debit cards and checking accounts to make up for the revenue shortfall.

Already, JPMorgan Chase, Wells Fargo and many other banks are reducing or phasing out rewards programs that gave users cash back for using debit cards. Chase has been testing a monthly $3 fee for debit cards in some states, and Bank of America and Citigroup have added new fees to some of their checking accounts. At least one credit union has capped debit purchases at $300 a day, and most of the nation’s 7,534 banks and thrifts are testing or plan to test consumer reaction to new fees or limits on debit cards or the checking accounts to which they’re linked, said Richard Hunt, president of the Consumer Bankers Association.

But how should debtors exiting bankruptcy respond to these changes?  Could this be a good time to return to the use of checks and cash instead of using a debit card? There are some arguments that avoiding the debit card might be in your favor.

Let’s take a look at a few of those arguments:

  1. One of the pre-Credit CARD Act arguments against the regular use of debit cards is that they cause consumers to spend more money.  When a post-bankruptcy debtor whips out their debit card to spend $1,000 on something they don’t really need, it’s a lot less painful than using cash.  For those post-bankruptcy debtors who want to have control over their budget, using cash, or even checks may be a better alternative.
  2. Debit cards may face spending limits.  Some banks are experimenting with programs that limit how much can be placed on a debit card in any given day.  These purchase limits can be as little as $300.  That means if a post-bankruptcy debtor wants to make a large purchase you may be better off using a check.
  3. Some merchants are now passing on to customers the cost of using a debit card.  The next time you go into the gas station or grocery store and want to use your debit card, some merchants might charge as much as $1 depending on what you’re doing. For a post-bankruptcy debtor watching every dime, such a large fee can add up to financial troubles.

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