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Anger flares over debit card fees

By Claes Bell, CFA · Bankrate.com
Saturday, October 1, 2011
Posted: 7 am ET

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?

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26 Comments
Cole
October 03, 2011 at 4:26 pm

And if someone steals your wallet, who do you call to make sure you get your cash back?

Wolverine
October 03, 2011 at 9:34 am

CASH IS KING.
You know, there was a time when debit cards didn't exist.

Shocking, I know.

Cole
October 02, 2011 at 2:23 pm

As much as I think the $5 fee is terrible and a direct result of misguided, overreaching legislation, I'd like to point out that the fee is not to use "your money." The fee is to facilitate safe, convenient transfer of your money to someone else.

As a side note, I think it is rediculous that people will cry about corporations not paying their share of taxes, but don't bat an eye when a credit union is tax-exempt for providing the same service as their for-profit counterparts.

Ray S
October 02, 2011 at 10:38 am

Like the author of the above article, I have been a B of A customer since I was 15 years old. I have been impressed over the past 57 years (I'm 72) to see this bank move with the time and stay on top of all the newest innovations including debit card, online banking and online bill paying.
Since the bank bailout fiasco and the acquisition of the sleazy Merrill Lynch group, my feelings have changed. This new debit card fee is the final straw. There is no way I will pay a fee to use my own money, especially when I use a debit card only occasionally. My money will be in a credit union by the end of this year!

Rob denton
October 02, 2011 at 8:47 am

Regions bank recently added a $4/mnth fee for debit card use. I called their customer service to voice my opinion and they blamed it on the new financial regulations. I told him that it was wrong to pass that on to the little guy. He did not care. I told him that I would be closing my accounts. Again, he did not care. Next day, I went to my local branch and closed out my personal and business accounts and cut up my regions credit cards in front of the rep. I went straight to a local credit union and opened up new accounts.

Kathy M
October 02, 2011 at 2:17 am

Credit unions are gearing up... mine already has a notice on their web page..."Free Debit Card...No Strings Attached!" There are ready for BOA, etc. customers!

Right now I have both BOA and a Credit union, come January BOA will be DOA with my money.

How dare they try to charge me to use my own money.

bill Cullen
October 01, 2011 at 10:20 pm

If B of A goes thur with these new charges.and try to make me pay for using my own money--I will close all my accounts with them ---and i have been with them 35 years. so they inturn they won't be useing my money to make money- and any politician that votes for another bail out of banks --I will vote to get them out of office.

Lori Miller
October 01, 2011 at 3:04 pm

I am very upset with the charge B of A wants to impose. I have already decided to move. I have been looking into only online banking and credit unions. Maybe if enough people move, the banks will think twice about their actions.

Susan Frazier
October 01, 2011 at 1:23 pm

Was a huge fan of BofA, with its online banking and ATMs everywhere. Had savings, checking, and mortgage with them. Now I'm looking for an alternative, likely a credit union.

fred hoffman
October 01, 2011 at 10:54 am

name some credit unions