I've gotten a lot of feedback on Friday's post on BofA's plan to introduce $5 debit card fees, most of it very critical of banks. This example, by a reader posting as Kevin, seems to sum up the feelings of a lot of Americans right now, who've not only seen their tax dollars used to bail big banks out, but those some same banks subsequently increasing fees:
I've been a BofA customer for nearly 20 years now. After hearing of the "debit" monthly fee, I've immediately decided to move my checking away from BofA. That fee offsets almost all interest I earn on my savings account, which by the way I moved away from BofA because they dropped interest rates off the charts. Greed from all angles has cost BofA a long-time customer. A combination of government meddling, which backfired because greedy vendors honestly won't pass their savings from lower swipe fees on to the consumers; and greedy bank fees have forced me to alter my habits and move my cash.
There's no doubt people are angry, and I think that banks only make the situation worse by framing these fee increases as a natural consequence of onerous government regulation. There is some truth to their argument; the business model for consumer checking accounts has been upended to a large extent by changes to Regulation E and the Durbin amendment, which cut off two big "back-door" ways banks had of profiting from their checking account divisions, overdrafts and swipe fees.
But banks have generally done a terrible job of selling these fees to the public. No one's going to be happy about paying new fees, but either the banks have just imposed them without comment, or told the public a sob story about how they just have to do it because of the mean government bureaucrats, etc.
Americans don't want to hear that, in part because they assume, correctly, that banks will still be making a boatload of money off debit cards. We make 40 billion debit transactions a year, and 40 billion times 24 cents, the new swipe-fee limit, is still a lot of money, even if it's not quite as much as the banks would like it to be.
Worse, banks haven't offered even the semblance of some kind of added value for the new fees. As one of my co-workers put it, "The least they could do is say, 'Now you can have your dog on the front of your debit card.'" In fact, they haven't offered any kind of value proposition at all.
On the other hand, I'm personally having a hard time summoning up a lot of moral outrage right now about the new fees. First off, we've been paying debit fees all along, they've just been built into the retail prices we've paid or that one time the bank charged $300 in overdraft fees after overspending at Christmas. Now, thanks to the aforementioned new regulations, they're in our faces, but it's not like they just materialized out of nowhere.
But I think the larger point here is businesses raise the prices on their products all the time. Unless we're talking about a regional monopoly like a utility or a cable company, people have the option to not buy the product they think is overpriced and buy someone else's product instead.
I'm a BofA customer, and I have been since I was 16. That's probably going to change in January. I'm not going to pay the $5 a month, because I don't believe the benefits of banking with one of the bigs -- an ATM or branch on every corner, an international reach and good tech offerings -- are worth paying a monthly fee for holding a debit card. Sure, having to go through the rigmarole of changing up my checking account is going to be pretty annoying, but I've been looking for motivation to switch to a credit union anyway, and this will likely do the trick.
The financial crisis, bank bailouts and Too Big to Fail are serious issues, and I think if people are upset about them, that's both understandable and a matter to take their legislators, and ultimately, the ballot box. But getting revved up about product pricing in a marketplace with many alternatives seems to me to be a waste of energy. In short: Don't get mad, get a better deal.
What do you think? Are you upset about the new debit fees being introduced by many big banks? Will you make the switch?