After I noticed that your post was entirely irrelevant I stopped reading it. Did I miss the part where you discussed Debit Cards and ATM rules?
His point is applicable to debit cards. People avoid debit cards with fees in favor of those without, even though they might be better off with the former due to receiving better rewards. It's a response to saying debit cards with fees are a rip off.
You missed my point. The bank is making money on most of their customers who are using the rewards program (although possibly not you, of course) not because of transaction fees but because these customers spend morel, pay more fees, and pay interest when they overspend and so forth because these customers tell themselves they want the rewards.
I don't disagree that some people will overspend when using cards compared to cash. But I'm not sure there's anyone who really wants that $25 gift card and goes out to buy a $2,500 TV for it. However, on a debit card the bank doesn't really profit from people spending more per purchase - they charge the merchant a flat fee per transaction and they can't get people to overspend and pay absurd interest. In fact, they can't even overdraft you unless you specifically opt in (one of the changes to consumer protection I most certainly approve of).
I'm aware that with credit cards, people often think of spending in terms of monthly payments. But that doesn't really apply to debit cards.
We discussed this in my class, in fact, on Thursday as an introduction to the chapter on budgeting. Exactly 5% of the students in the class make a written budget. Many of them admit they use the debt card frequently and do not keep up with it. That's scary for many reasons but an additional one we haven't mentioned is they are unlikely to catch bank errors. I usually tell them my stories about bank errors and their eyes get very large!
I'm glad to hear you're covering this in your class. Maybe you can suggest mint.com to your students as a way to make it as painless as possible? It should be easy for them to look at a report after a month and maybe talk about in class - but getting people to list every purchase they've made is notoriously difficult. I remember India changed its consumer survey from purchases in the last 30 days to purchases in the last 7 days, I believe - and the number of people who were poor (using the same standard as before) plummeted. People simply didn't recall purchases they made 3 weeks ago.
