Why Clark Is Prepared To Break His ‘No Debit Cards’ Rule

Clark Howard has advised consumers to avoid paying with debit cards for years.

His reasoning is pretty simple: When compared to credit cards, they offer inferior consumer protections. Plus, you could be leaving 2% cash back (or more) on the table by not using a cash back credit card.

But Clark is prepared to break his own rules in 2024.

Thanks to upcoming changes for credit card fees, many merchants are likely to soon pass along a "swipe fee" to customers making purchases with a rewards credit card.

This is a practice you may have already experienced paying bills online, but it’s soon to be more widespread and could impact everyday purchases both in stores and online.

During a recent episode of The Clark Howard Podcast, a listener asked Clark what he would do when faced with these fees at the register.

His answer may surprise you!

Clark Is Prepared To Ditch His ‘No Debit Cards’ Rule in 2024

Credit card processors Visa and MasterCard recently reached a $30 billion dollar settlement on an antitrust lawsuit that accused the payment giants of charging inflated "swipe fees" to merchants.

As a part of the settlement, some new rules will allow merchants to have more control over the transaction process.

Clark has prognosticated that this will include an increase in "convenience fees" for using a credit at a point of sale. Those fees could even become as sophisticated as charging more for certain types of credit cards that are more costly for merchants to process.

That could make using a rewards credit card much less attractive than it is now.

And, as you'll see in Clark's response during this "Ask Clark" segment of his podcast, he's ready to pivot to a debit card if necessary.

Chad in Oklahoma Asked:

“With the change to merchants starting to charge a convenience fee, what should we use to avoid this fee? I never carry much cash and I know Clark hates debit cards. What about online transactions?”

Clark Responds:

First, Clark prefaced his response to Chad with some explanations on the marketplace still sorting out how it will handle these transactions and also lamenting that Congress could solve this issue for consumers by extending the same consumer protections that credit card users receive to debit card swipes. (You can hear that full response on the podcast.)

But, ultimately, he got down to business on what he will personally do:

“So, if it were me, what would I do?” Clark pondered. “I have an ATM card that has a Visa logo on it. I’ve never used it for anything but drawing out ATM money. And I’ve been thinking this through. So I’m so glad that you posed this question, I have made the decision that, when there’s now going to be a fee, I’m going to — for the first time ever — use my debit card and know the risk that comes with it.”

Clark went on to give some solid advice for setting up a debit card specifically for this purpose to minimize the risk:

“The smartest thing to do — because of the lack of protections under the law — is to set up a separate account,” Clark says. “Maybe with an online bank that charges no fees or something like that, but it ties into a debit card.

“And then the only money at risk is the money that is your regular ‘walking around’ money. That way you can use that debit card to pay for things as it becomes more common to be assessed fees for using a credit card.”

Clark Predicts What Will Happen Next As Processing Fees Evolve

You may be thinking to yourself: "This change kind of stinks."

And we agree that it’s a no-win situation for some consumers. You may find yourself in a situation where you can’t use your trusty rewards credit card because the fee is too high, and you won’t want to use your debit card because the risk to your attached banking product seems unnecessary.

When a situation like this arises, generally it will reach a tipping point and the marketplace of ideas will hopefully provide a solution.

Here’s what Clark predicts may happen next:

“This will become routine. It’ll be a gradual thing and then one day you’ll be like: ‘Oh, everybody’s charging these fees now’ and then you’re gonna wish for an alternative payment system,” Clark said.

“The day will come that Apple — with its large ecosystem — will have their own payment platform. I’m not talking about Apple Pay. I’m talking about something where you will actually pay with some form of “Apple Debit.” Google may launch something like that as well. We will have alternatives to the banks.”

Clark, who is notably not a big fan of big banks, says that they are “stupid” for letting things play out this way.

“The banks are so stupid,” Clark said. “The banks used their lobbying power to prevent consumer protections for debit cards. And by not giving people a safe harbor in using debit cards, they give people a reason to look for alternatives to using a debit card to pay. So, it’s really shortsighted of the banks to feel like they got some kind of victory by sticking consumers with the risk of debit cards that consumers don’t have with credit cards.”

Will you become a debit card user? We’d love to hear your thoughts in the Clark.com community.

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