Debit Cards

/Debit Cards
­

Question: How Much Do Banks Earn From Overdraft Charges?

Answer: Billions!

Happy New Year! Welcome back to school. I know that banking tends to be a unit that many of you teach early in the semester so this data should prove particularly timely. I have posted on this topic several times but have some new data to report about the three largest U.S. banks and their fees from overdraft charges (from Financial Times, subscription required):

screen-shot-2017-01-02-at-5-11-04-pm

This quarterly data on the three largest banks shows how fees tend to grow over the course of the year as evidenced by the quarterly data from 2015. So, back to the question about how much they are charging for overdrafts…Let’s make the math easy and say $400mm per quarter or $1.6 billion a year for each of the three banks totaling $4.8 billion for the three of them combined. Some other nuggets from the FT article:

Question: How Long Does It Take a Hacker To Steal Your Credit Card Information Online?

Answer (from Newcastle University research): About 6 seconds (yikes!) [This should grab your students attention!]

From Thrillist:

According to new a paper authored by Newcastle University researchers, hackers can mine your financial information using simple guesswork, spread out across multiple websites. When the process, known as a Distributed Guessing Attack, is coupled with a specifically designed toolkit, it isn’t very hard to exploit the security systems of major e-commerce sites…

Here’s a 31 second video explaining the technique:

Question: What’s the Difference Between Debit And Credit Cards?

Students are often confused about this distinction between debit and credit cards. Here are some resources that help show the ways in which they differ:

Infographic: What’s Your Holiday Spending Habits?

Ok, I know that it isn’t even Thanksgiving yet and may seem a bit early for this, but I know the planners out there want to be armed with holiday-themed content! From NerdWallet’s 2016 Consumer Holiday Spending Report

Chart: How Do People Pay For Things (By Age)?

New Federal Reserve of San Francisco report is chock-full of graphs about payment preferences gathered from their 2015 Diary of Consumer Payment Choice. With so many graphs to choose from, I thought this one could kick-start a great discussion:

screen-shot-2016-11-07-at-5-07-02-pm

Just to orient you as to what is being measured here, this graph focuses on the number of transactions rather than the actual value. So, while the percentage of cash transactions might seem high, most of these transactions were for small dollar amounts.

Here is the accompanying text from the report:

Online Bill Payments Are Easy But…

…you better triple check that you didn’t have a typo. One couple shares their story about what happened when they hit the wrong key.

From 6ABC.com:

Why this matters:

Article/Chart: How Do Credit Card Companies Make Money?

From the Economist:

20161015_fnc818

Economist article provides good description of interchange fees paid by merchants to card companies (and ultimately paid by consumers):

What’s New With Prepaid Debit Cards?

download-18

New regulations are on their way..here’s an FAQ to help you and your students sort it all out:

  • How big is the market for prepaid cards and who uses them? (Atlantic):

The market for prepaid debit cards has grown dramatically in recent years: The number of people using the cards in addition to their checking accounts increased by 50 percent between 2012 and 2014. According to a report from Pew by 2014, around 23 million Americans were regularly using reloadable cards, and more than one-quarter of those users were Americans who didn’t have bank accounts and were mostly low-income and black. For all their shortcomings, prepaid debit cards fill an important role for Americans who don’t have access to traditional checking or credit accounts. These services allow them to perform basic tasks, such as paying for goods or services online or taking cash out from a convenient ATM, that many Americans take for granted.