Are Debit Card Fees for Customers Necessary?

Wednesday, October 05, 2011

For millions of Americans, debit cards have become a free and easy way to make their purchases. Last week, Bank of America announced that starting next year, it will charge its customers $5 a month to use debit cards. Other banks have begun to follow suit — Wells Fargo and Chase are charging $3 monthly debit card fees, while SunTrust is also charging $5. President Obama has expressed his distaste with this decision, saying "My hope is that you're going to see a bunch of banks say to themselves, 'You know what? This is actually not good business practice.'"

Richard Hunt, president of the Consumer Bankers Association, a trade group representing the country’s leading retail banks, defends the banks' decision to levy new fees on their customers.

Comments [13]

MH

Regarding Tim Scannell's comments, just to clarify another poorly informed statement.

His "fact" that BoA used bailout money to buy Wells Fargo couldn't be further from truth or fact... Wells wasn't even bought... they bought Wachovia. And his 'fact' that banks are taking no risk is absurd. Take Fraudulant transactions.. the merchant get's their payment. The consumer is reimbursed. That leaves the Bank to eat the losses. Using the "don't confuse me with the facts, I've already made up my mind" mentality is why there is so much dis-information floating around these days. Just saying.

Oct. 06 2011 11:06 AM
Brad Morrison from Richmond, TX

The repeal of bank regulation in the 80s and 90s is the sole cause of the recent economic disaster.

The idea that regulations are bad is, at best, a tired talking point. Corporations must be regulated, or they'll act only in their own interest -- as wild animals do. There is nothing wrong with making a profit, but the last few decades have revealed that corporations will bend, break, or just plain influence laws for their own benefit.

If you think for a moment that a corporation is ever going to consider you and your situation (hint: where are the jobs?), dream on. Corporations will distort the truth in the same way that Richard Hunt did with his talking points.

Watch and see which big banks do not push the cost on to the consumer. And pay attention to what corporations do with their profits: They give their bonuses to their executives and dividends to their shareholders.

That is, we are not the customers; we are merely the consumers. Little by little, our influence over "our" country is being taken by corporate lobbyists. Mr. Hunt's doubletalk may be enough to convince the Congress, but I don't believe it for a second.

Oct. 06 2011 09:55 AM
Gary Hughes from NYC

Both Durbin and Frank laws have had unintended consequenses. In capping "hidden" fees (that by law are always disclosed at time of opening an account), that were normally paid by only the consumers that incurred them, banks are now capped, and the resulting shortfall must now be paid by everyone.

Instead of adding more rules to the banking industry and completely adding yet another layer of government, I think consumers would be better served by having more audit and enforcement staff added to current regulatory agencies so that they would have enough capacity and time to dig into, and enforce, the laws already on the books......which have had much of the same intent as these new rules.

I personaly feel that all these new rules do is re-allocate costs from consumers that committ to agreements they choose to not understand, to those that are aware and responsible.

Other listener comments below are correct as well - are retailers passing that lower transaction cost onto consumers???

Remember - Banks are for Profit organizations - if you don't like them making a profit - go to a Credit Union.

BTW - I credit the hosts with having the industry rep on to explain the Bank's position, but felt they didn't want to accept nor really wanted to get into the facts of what he was saying.

Oct. 06 2011 09:17 AM
Greg

The Durbin Amendment is solely responsible for the wave of new bank fees. BofA and all other big banks are looking for ways to make up for lost revenues and, frankly, I can't blame them, even as I don't enjoy paying higher fees.

It's been abundantly clear ever since the debit interchange limit was first proposed that it was ultimately going to hurt consumers in the form of higher fees and that is precisely what is currently happening. http://blog.unibulmerchantservices.com/banks-discontinue-debit-rewards-programs

Oct. 05 2011 05:05 PM
Tony Vahl from Florida

So, the Dodd-Frank Bill was portrayed as protecting consumers. Meanwhile, corporations like Bank of America fund the campaigns of politicians. Banks and political leaders blame each other in public. The consumer gets hit with $5/mo fees; prices at stores remain the same.

Who is being protected again? And who benefits from Dodd-Frank?

Oct. 05 2011 11:10 AM

Rick Evans -

While I agree with you that debit transaction fees are being singled out there is a perfectly good reason -- banking practices are very different from other types of overhead costs paid by retailers.
Historically banks pushed retailers to accept POS (point of sale) systems to lower the banks costs of processing cash and checks. And as these systems became almost universally accepted (benefiting everyone), the infrastructure costs dropped yet the banks (against rational expectations) managed to hold up or increase fees. Just ask your local retailer. The large U.S. banks run more like RICO organizations than normal companies. The immense operating costs (including but not limited to executive compensation) are just one sign of how corrupt large U.S. banks are. Somehow, in spite of their smaller scale, the smaller community banks are able to deliver more consumer services (better in quality and quantity) for lower costs.

Oct. 05 2011 09:57 AM
Listener

Thank you for finally allowing a fair comment from the side of business, in this case the banking industry. Your listeners need to understand that businesses are not charities. They exist to make a profit. And it is this dynamic that built America. Once again we must pay for the unintended consequences of government meddling.
Oct. 05 2011 07:38 AM

Oct. 05 2011 09:56 AM
Tim Scannell from Hingham, MA

I cannot believe that banking mouthpiece was given so much leeway in expressing outright lies and fabrications about the poor banking industry. The government did not force or mandate BOA and others to charge for debit fees, nor did BOA lay off tens of thousands of people because of falling profits. This is just one more insult to the American public an dnail in the coffin of the middle class.

Fact: BOA did take the bailout money an dused it as a short-tem loan to buy Wells Fargo. Fact: BOA and other banks are not taking a risk with debit cards since th enactment of new opt in/out rules. If the money is not in a user's account, the transaction is declined, if the user stipulates tells the bank to do this. If not, and thee is no money, then BOA and others can charge exorbitant fees - in one personal case, $35 because my son went over $.50 cents when he purchased a coffee. Actios like this make putting your money in a sock tied to your bedpost seem more and more attrative.

Oct. 05 2011 09:50 AM

RE (Anonymous) Listener's comments:
"So someone who has never run a private sector business and created the largest debt in world in history which is profoundly harming our economy is giving business advice?"

1. You don't need to have run a business to recognize poor or corrupt business practices. According to your logic, only criminals are capable of judging the criminality of others. That's patently false. Besides, consumers aren't mindless idiots -- they amass experience and know which businesses deserve respect and which are only around because of their massive financial and political power.

2. "largest debt in world history"?
Really? What planet were you on for the last ten years? The US Government launched two wars (now the longest in US history) and kept them of the financial books!! And then gave billions away in tax breaks and corporate welfare. Most of that debt was run up before Obama was even in office.

Oct. 05 2011 09:42 AM
Rick Evans from Massachusetts

The bank spokesman was right on the facts if not on the P.R. When fees were hidden intelligent consumers were concerned with product price and value.

Do retailers tell us what they pay for utilities, labor or the wholesale price of a product?

Well, toddlers, thanks to your nanny state pols that fee has now been separated from the cost of what you buy and visibly added to the cost of your transaction service.

Notice any passing of the savings by retailers to consumer?

Oct. 05 2011 09:40 AM
Margaret Conner from Savannah Ga

just heard the outrageous justification by the bank industry on debit card fees- I believe that banks use our money on deposit to loan out to others-or just my money just sit there?

Oct. 05 2011 09:30 AM
listener

The President said "You know what? This is actually not good business practice.'"
So someone who has never run a private sector business and created the largest debt in world in history which is profoundly harming our economy is giving business advice?

Oct. 05 2011 07:56 AM
listener

Great guest and I hope the hosts finally reflect the facts he provided in their future programming even though it runs contrary to the lazy narrative of demonizing the banks we have been hearing lately.
Hopefully now we can examine how this same kind of government meddling in the lending industry led to the housing bubble and our current economic quagmire.

Oct. 05 2011 07:38 AM

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