Debit cards are the way to go
Over the holidays I made several major purchases using my bank card rather than cash or a credit card. I’m sometimes surprised that more people don’t use their bank cards (or “cash cards” or “ATM cards” or however you want to refer to them) as debit cards, since most can be utilized that way. Of course the retailer has to accept debit card payments, but I’ve found that many larger ones do.
The advantage of using a debit card is obvious. There’s no need to carry large amounts of cash, and charges are immediately subtracted from your bank account, or on the next business day if you’re making the purchase on a weekend or holiday, or at night. Actually, some people may find this latter point a disadvantage if they aren’t always sure how much money they have in their account at any given moment, in which case a credit card might be better since the withdrawal (assuming you are using your card as a deferred payment card and not as an actual credit card) won’t be made until the next month or whenever payments are normally made from your card-specific account. But I think most people have a good idea how much money is in their account. The most important consideration is that it doesn’t cost you anything to use a debit card.
Which may explain why banks don’t really promote them. These days banks aren’t really making money the old-fashioned way, meaning through loans. More and more rely on services, and one of the primary services is ATM fees, which are often difficult to avoid. If you’re withdrawing cash and the ATM you’re using is not operated by the bank with which you have your account and/or it isn’t done during standard business hours (usually 9-6) then the chances are you’re paying a fee to access your money. And if you’re doing some other kind of transaction, like sending money to another account, then you’re even more likely paying a fee, and a fairly steep one.
Some banks in Japan, like convenience store stalwart Seven Bank, affiliated with Seven-Eleven, make all their money on ATM fees. They have no financing services at all. As former Livedoor CEO Takafumi Horie wrote recently on his blog, ATM fees are basically taxes that banks charge you to use your money because they are too lazy or too cautious to think of other ways to make profits. Moreover, ATM fees are standard at all banks because of the industry’s cartel-like mindset. In the past, several banks, like Tokyo Star Bank, tried to be more competitive by waiving all ATM fees. Other banks responded by threatening to cut them out of the network, meaning Tokyo Star’s customers would not be able to access their accounts through other bank ATMs.
Electronic cash receives a lot of press, but it also isn’t quite as convenient as debit cards. Services like JR’s Suica or Seven Eleven’s Nanako or Edy usually require you to “charge” your cards with electronic cash before using them, since they are in essence sophisticated pre-paid cards. Debit cards require no such work since they simply let you tap the money you already have in your bank account.
The downside to debit cards is that they can be stolen, but that’s true of any card. The main disadvantage is on the retailer’s side. I don’t know what kind of fees retailers have to pay to set up and maintain service for debit cards, which is usually done through a credit card service or financial information center called J-Debit. Convenience stores as a rule don’t accept bank debit cards. Nor does JR and a lot of the larger department stores still seem resistant. In other words, businesses that already have some kind of stake in credit cards or services that debit cards could render pointless probably don’t accept them. But hotels, travel agents, clothing stores and, in particular, electronics retailers are getting with the program.
And they’re easy to use. All you do is input your PIN number into a special keypad. The only thing that bothers some people is that the clerk usually slides the debit card through the card reader. Overseas, it’s been my experience that the customer does the sliding, at least with credit cards, to avoid any possibility that the clerk might somehow steal the information. I tend to think Japanese clerks can be trusted, but maybe I’m naive.