You may have heard recently that banks were planning to boost income by instituting monthly fees for debit cards.
In the face of public outrage banks backed off that proposal but they may have tipped their hand. One way or another, consumers will pay more for banking services in the future -- and that could come at the expense of CD rates and interest paid to other deposit accounts.
According to a recent study by Market Rates Insight, a pricing consultant to financial institutions, banks could have avoided alienating customers and doubled their take simply by lowering interest rates by as little as 1 basis point. A basis point it one hundredth of one percent.
The analysis found that banks stood to gain $875 million in monthly debit card fees if every adult banking customer in the U.S. ponied up five bucks a month.
"A decrease of 0.01 percent in the national average deposit interest rate reduces interest expense for banks by about $1.5 billion a month, which impacts the bottom line in the same way as earning this amount through fees," the press release from Market Rates Insight reported.
By skimming a little from already-low interest rates, banks could have avoided the PR hassle caused by the debit fee fiasco. The question is: would you rather pay a monthly fee or earn even less on deposits?
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