Is Bank of America’s $5 Monthly Debit Card Fee Just the Beginning?
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In a word, yes.
Consider this phrase — “Take money from businesses, they’ll just turn around and take it from the customers.”
I’ve heard that, and many variations of it, several times over the last few years. Now it looks like it’s coming true for all of us.
It’s no secret that banks make a lot of their money from fees. Whether it’s late payment penalties, interest rate hikes, ATM fees, money-wiring transactions, or any number of other transactions, fees are the bread and butter of the banking industry.
These fees seemed to be going away, or getting vastly reduced, as banks tried to outdo each other in the battle for your hard-earned money. Free checking was suddenly the norm, and then banks would offer even more incentives (free iPods, luggage, shotguns, and good old cash) in an effort to get you on board.
Of course, nothing lasts forever, and the free checking benefits we’ve all enjoyed for many years have started to suffer the death of a thousand cuts. Slowly but surely, free checking is going away and being replaced by certain terms and conditions that give you certain free features IF you maintain a set minimum balance, have a significant number of direct deposits, and so on.
In fact, you can actually avoid Bank Of America’s new debit card fee if maintain a minimum balance of $20,000. (Once again, we see wealth being rewarded.) You can also avoid the fee by simply using your debit card as an ATM card only. (See also: 4 Ways to Beat Debit Card Fees)
So Why Did This New Fee Appear?
Well, it’s a direct result of a bill passed by congress that was supposed to save consumers money. Of course, it never works out that way, does it?
Banks have been making billions of dollars on swipe fees for many years now. These are fees charged to the merchant every time you swipe your debit card, and they average around 44 cents per swipe.
Or at least, they did. Merchants lobbied against the fees and won, saying that by lowering the price of these swipe fees, we, the customers, would get lower prices on goods and services.
But when they passed the law, they didn’t think of the ramifications of the ripple effect. It’s also known as “unintended consequences.” By cutting these fees in half, billions of dollars have been taken away, annually, from the banks. Ouch. You know as well as I do that those losses are not going to be absorbed by the banks. The CEO, Brian Moynihan, isn’t going to pay for it out of his $950k salary or his $9 million in stock awards.
So who pays? You’ve guessed it — we’re the ones who pick up the tab. And the $5 per month debit card charge is only just the beginning; I guarantee it.
Bank of America Is Not the Only One Raising Fees
JP Morgan Chase customers in Wisconsin have felt the pinch, with $3 per month being deducted for debit card usage. Sun Trust (Georgia) and Regions Financial Corp. (Alabama) are also charging $4 to $5 per month.
And Wells Fargo recently announced that it will test a $3 per month debit card fee in five states — Oregon, New Mexico, Nevada, Georgia, and Washington.
What Does the Future Hold?
Fees. Lots of them.
Right now, with the financial institutions just starting to roll out fees, you obviously have the option to walk away. But that won't be an option for long. If you want the conveniences that a typical bank offers, you’re going to have to start paying for them. Banks across the U.S. will follow Bank Of America’s lead, because they’re losing out if they don’t. And any banks who don’t charge the fee will no doubt find other ways to make up the losses. You’ll see free checking replaced by checking that requires maintenance fees. You’ll get dinged if you go below a certain balance, or if you make more than a set number of purchases with your debit card each month.
There will be tiered plans — $3 a month for 50 swipes, $15 for unlimited swipes. And why not? The cell phone industry is all about tiered pricing. And you’ll have to pay for the privilege of online banking, automatic bill payments, even checking your balance on your phone. This is the future, and if everyone’s doing it, so we really don’t have an option other than to remove ourselves from the banking system and go back to the stone-age. Anyone for a mattress stuffed with cash?
And What About the Merchants Who Said They’d Cut Prices?
That’s a tough one to prove. Walmart has been rolling back prices for years, long before this bill came into effect. Target, Home Depot, Best Buy, you name it — they constantly claim to be slashing prices, so how can we tell if those savings are being passed on to us?
Truth is, as consumers, we can’t. I’m not saying that the big corporations are going back on their word to pass on savings to the customers, I just can’t prove that they are. I suspect the reality is somewhere in the middle, with some savings being passed on to us, and some money going back into the wage packets of CEOs and senior management.
Sadly, it’s just another example of the consumer being at the bottom of the hill…and we all know what rolls down hill.