Which is why some merchants are encouraging consumers to use debit instead of credit if they are given a choice.  The transaction fee for debit is less than what it is for credit.  Banks, on the other hand, would love to get consumers to use credit for every debit purchase since they earn more money that way.  That’s how the interchange system works.  Unfortunately, most people don’t realize that.  When a bank dangles a free movie ticket in your face, it’s really about the bank enriching themselves at the expense of the merchant while pretending to offer you a nice freebie.

If you look at the entire financial system over the last few years, it’s all about the different ways to charge fees for everything underneath the sun.  If you bought a cup of plain black coffee at Starbucks that causes your checking account to be overdrawn, the bank will charge you an overdraft fee for each and every item that comes.  If you use a foreign ATM to withdraw money, you will get hit with a fee by the ATM owner and the bank.  If you don’t keep a minimum balance in your savings account, you will pay a monthly maintenance fee.  (Never mind the five percent interest spread that the banks make from paying out on savings and earning from loans.)  The financial system is no longer in the business of creating new wealth that benefits society as a whole.

These fees will soon change this summer.  The bank will lose a significant source of easy profits by no longer being allowed to charge overdraft fees if you don’t opt in to their overdraft programs, and the interchange fee will be reduced for merchants.  No doubt that the banks will find new fees to make up difference, like eliminating “free” checking accounts by charging a high monthly maintenance fee.  The fee list will continue to grow until consumers cries out again and politician finds it in their self-interest to bring the banks under heel.

I have no intention of switching from debit to credit to score a free movie ticket.  The only ethical way I could do that was to make purchases at a merchant that does credit transactions by default.  That would be my local gas station.  However, I only buy gas once or twice a month, and don’t drive enough miles to buy gas 30 times in two months.  Unless, of course, I buy a gallon of gas at a time.  That’s not ethical because that’s gaming the system.  Then again, the banks are already gaming the system.  Not that I would try to do that at my local gas station.  The fat Indian guy might come out of his booth with a baseball bat to swing at my head if I’m messing around with his pumps.  He yelled at me once for using an American Express card—before they cancelled it—that he doesn’t take.

The U.S. Mint found itself in a similar situation last year when they offered free shipping for gold coin purchases made by credit card. Some people were repeatedly buying gold coins on their credit cards, depositing the gold coins at the bank to pay off the credit card balance, and earning frequent air miles to score free airline tickets.  They weren’t doing anything illegal except gaming the system as they found it.  The U.S. Mint put in safeguards to prevent abuses of this nature.  Gold coins are for collectors, not speculators.  Never mind that the frothy gold market today.

I sent off an email to Wells Fargo Bank customer service to ask them if I could get a free movie ticket if I did buy a gallon of gas 30 times in two months.  Not surprisingly, they didn’t know about this promotion and told me to check in with the local branch office.  That I didn’t do.  Every time I go in to make a cash deposit inside (those envelope-less ATMs don’t think my cash is good enough for them), the tellers remind me that I don’t have a savings account and no overdraft protection. They’re never happy to hear that I havemy savings account at a different bank that charges no monthly fee and pays one percent more in interest, and I’m really careful about managing the money in my checking account.  People like me who manage their finances responsibly are the kind people that banks don’t like since they can’t charge extraneous fees.  No wonder they’re going broke.