Yesterday, the CEO of Bank of America argued that the bank has a “right to make a profit.” They do, in fact, have that right. But that doesn’t mean you have a responsibility to help them with that. If you regularly use your debit card and don’t want to pay the new $5 fee each month you use the card, you have a few options for avoiding the fee:

Switch to Cash
Many people have stopped carrying cash, but cash is still accepted in most places. I won’t say all, because I’ve been in doctor’s offices that couldn’t make change and airlines don’t take cash for in-flight purchases. But, for small, day to day purchases, carry cash. The merchant will be happier and you won’t get slapped with a fee. It might even reduce your urge to make all those small purchases.

Get a Credit Card
Of course, cash might not be appealing if you need to make a large purchase, and it won’t work for online or phone orders. Even if you avoid credit, you might want a credit card for these purchases exclusively. In addition to avoiding the debit card fee, you’ll receive purchase protection. Just make sure you choose a card without an annual fee. Only use the card for large purchases where cash is challenging, or online/telephone purchases. Don’t carry it with you. Then make an online credit card payment for the same amount as soon as you complete the transaction. It’s an extra step, but you won’t get dinged a $5 fee for the privilege.

Choose a Credit Union or Online Bank
Bank of America isn’t the only bank testing debit card fees, so you’ll probably have to avoid traditional brick and mortar banks to avoid debit fees. You can switch to a credit union, most of which belong to extensive ATM networks, or you can switch to an online bank. An online bank as your primary bank shouldn’t be your first choice if you make a lot of ATM deposits, but it’s great for those of you who generally only receive direct deposits, or can wait for deposits to be processed by mail.

While the new debit card fee is annoying, it can be avoided. I do wonder at the wisdom of the big banks doing this. As an NPR commentator pointed out yesterday, it does require effort to change banks if you have direct deposit, automatic debits, and online bill pay, but people will do it if the banks push us hard enough. I only use my debit card to withdraw cash, so I won’t be hit by the fee. But for those of you who rely on debit cards, I think the day will come soon when online banks will have those snazzy check scanning apps, and that might be all it takes to convince many people to leave the big banks.

I wouldn’t expect the fee to go away unless Congress changes the regulations or Bank of America loses customers in droves.

Here I go with another controversial topic guaranteed to result in flaming comments. My flame retardant suit is donned, so here I go.

One of the goals of Occupy Wall Street is to forgive all outstanding student loan debt under the premise that it would inject money into the economy by helping the real people, rather than banks and corporations that received bailout funds.

TARP Funds Were Repaid
So let’s start with the basic premise: banks and corporations got free money, so we should, too. First, the TARP funds were loans. The money has largely been repaid. Corporations that received money, like GM and AIG, granted the US stock in exchange. The US will get the money back when it sells the stock. It’s not a loss. Forgiving student loan debt would result in a net loss.

Student Loans Are Unfair
I will grant this argument. As I stated in an earlier post, college costs are wildly out of sync with future incomes, and the system needs to be fixed. But simply forgiving all student debt won’t change the system, because the people repaying loans have already finished school. Those costs have already been paid. You have to fix the system by changing the way student loans are issued. Colleges can raise costs as much as they want because student loan issuers know that loans can never be discharged in bankruptcy. They have no incentive to deny a loan.

Restore the ability to discharge student loans in bankruptcy (this didn’t happen as often as student loan lobbyists claimed) and there will be instant pressure to reduce college costs because loan limits will be enforced.

In addition, Congress mandated ridiculously high interest rates, especially compared to today’s low interest rates. Student loan rates should be re-pegged to current interest rates like they used to be. That would instantly alleviate some of the burden. By allowing anyone who hasn’t consolidated their loans to do so at 1 or 2% interest would be a boon and restore fairness to a system that Congress made unfair.

Forgiving Student Loans Will Result in Spending Increases
How is that exactly? Will I suddenly go on a shopping spree because I have $1200 extra dollars a month? No, that money would go into our retirement fund along with our other excess income. The most recent college grads probably won’t increase their spending either. They’ll probably just reduce the amount of credit card debt they accrue because they’re unemployed or their first jobs don’t cover the cost of other living expenses.

Student Loans Are Predatory
Yes, this is true, but here’s the thing: no one is required to get a student loan. If you don’t want student loan debt, do three things: 1. Go to a cheaper school. Spend two years at a community college and live at home to save on rent. 2. Work during the summer, after class, or take a year off to work and save up the money for college. 3. Keep your grades up and apply for scholarships or grants.

Should All Taxpayers Pay for Your Student Loans?
At this point, all federally subsidized and unsubsidized student loans are owned by the government. Once Congress removed the fees provided to banks to carry these loans, the loans were sold back to the government. I recently received a notice that my loans had been sold to Sallie Mae. My husband’s were sold as well. He may have a small private loan outstanding still, but all the rest are owned by the government. So, for the most part, it would just take a few keystrokes to wipe out student debt.

But, the money is used to issue additional student loans to new students. Are we also going to make college free for current and future students, or does this immediate student loan forgiveness only apply to past students?

Part of me would love to have my student debt and my husband’s student debt forgiven. We’d be able to put the money into our retirement funds. But I still don’t think it’s fair. I knew what I was doing when I took out my loans. I don’t deserve to have them forgiven just because the economy is bad. What will people do during the next deep recession? Forgive all mortgages? Forgive whatever bill someone has that they don’t want to pay?

 

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