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My understanding is that PIN debit cards don't have the same built-in profit that credit cards do. I looked at US Bank, and their check card rebate requires that you pretend that it's a credit card rather than a debit card by hitting "credit" on the keypad when you check out. Is USAA the same way? I'm pretty sure this means that the merchants get hit with the regular credit card fee rather than the lower debit card fee, and therefore that your merchant is helping to finance your rebate.

Exactly. But the idea that banks couldn't provide bonuses on check cards (when used through the credit system) because there wasn't money there was what I was commenting on. Yes, the merchant is helping to finance the rebate, but this is a bit of the prisoner's dilemma -- I could push debit and save the merchant some money, but that really isn't going to do anything to prices; instead, a large scale action such as the one that is being attempted now is required.

In addition, while in big cities it doesn't really matter, in smaller places it's a big issue whether money goes to local merchants or to Visa/Mastercard. Since local economies benefit when the money stays at home, and since Visa/Mastercard does nothing for my community, my vote is with the local merchants.

Maybe. Visa, as a for-profit company, does make some money, although fees are shared with contracted banks; MasterCard, as a not-for-profit association of banks uses what money it needs to operate and then shares the rest. When USAA (also an association, not a corporation) makes money from the use of my card (and also pays me a rebate), the 3 or 4 million active duty, retired and separated military members and dependents who are members of USAA also benefit (through lower costs for insurance and profit distributions). They are my community, so my view is a little different. If you have a small-town bank, you could also argue that the some of the fees that Visa/MC charge stay in your community as well.

Is the check card rebate an efficient way to keep consumer's costs down? Probably not. But as long as banks are collecting fees from merchants, it makes sense to do business with a bank who is going to share the fees.

-z
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