We write about credit cards a lot in this blog. We’ve covered the credit card reform pretty closely, documenting many of the “unintended consequences.” However, today we want to address a different form of plastic: debit cards.

While we’ve encouraged consumers to some degree to focus on debit as opposed to credit in order to help keep spending under control, that doesn’t mean that debit is perfect. Like most things, it has flaws. Today, we want to examine some of the possible downsides of debit.

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Each Saturday we review all the stories we published during the week — just in case you missed one or two.

Friday

“FHA Reserves Almost Gone, And There’s No Going Back“: HUD/FHA say no need for a bailout. We say that the FHA’s expanded role in the marketplace suggests otherwise.

Thursday

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As part of an effort to step up consumer protection against things like excessive fees, the Fed announced a final rule, beginning in mid-2010, that will prohibit banks and credit unions from charging overdraft fees unless their customers agree to overdraft protection. As reported by the Wall Street Journal, banks and credit unions make between $25 billion and $38 billion a year on overdraft fees.

Customers must decide whether or not to “opt in” to protection. Let’s say you’re attempting to make a purchase that would over draft your account. If you opt to have protection, your transaction goes through, but you’re hit with a fee. If you opt out of the program, your transaction will of course be denied on the spot.

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(hat tip: The Consumerist)

Both American Express and Discover plan to eliminate their overlimit fees on consumer credit cards. While Discover has promoted the new practice as a convenience to its customers, the experts say it’s just one of the first examples of how the new credit card reform will limit the card companies’ profitability and change the landscape of the industry (emphasis added):

“Issuers should take overlimit fee income out of their P&Ls [profits and losses],” said Philip J. Philliou, a former Amex executive and a partner in the Philliou Selwanes Partners LLC consulting firm. “Under the best of circumstances, it’s a much more limited income stream than in years past, and this additional hurdle of assessing the fee” under the new law “begs the question of whether it’s efficient and practical” to do so.

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Has your bank been charging you extra fees on your various accounts? Saddled with losses from rampant foreclosures and credit card delinquencies, banks and credit unions say they have been forced to raise fees and charges in order to maintain a competitive edge in today’s unique economic environment:

“There is an economic storm that has made revenue fall,” said Michael Moebs, an economist and chief executive of Moebs Services, an economic research firm in Lake Bluff, Ill. “Fee income is basically where banks and credit unions can offset both loan- and investment-related losses.”

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