Bank of America, the nation’s biggest bank, said on Thursday that it planned to start charging customers a $5 monthly fee when they used their debit cards for purchases. It was just one of several new charges expected to hit consumers as new regulations crimp banks’ profits.
Wells Fargo and Chase are testing $3 monthly debit card fees. Regions Financial, based in Birmingham, Ala., plans to start charging a $4 fee next month, while SunTrust, another regional powerhouse, is charging a $5 fee.
The round of new charges stems from a rule, which takes effect on Saturday, that limits the fees that banks can levy on merchants every time a consumer uses a debit card to make a purchase. The rule, known as the Durbin amendment, after its sponsor Senator Richard J. Durbin, is a crucial part of the Dodd-Frank financial overhaul law.
I read this story last night after returning from another one of Dave Ramsey’s FPU classes given at a local church. I had just heard Mr. Ramsey make an impassioned pitch for ditching credit cards in favor of debit cards. Just when you think you’re getting ahead, corporate America provides the antidote. One wonders how banks are losing money when they have so many ways of bleeding their customers, and the take from their credit cards late payment fees alone is amazing. It would be interesting to hear Ramsey’s take on this latest development.
It may be time to go back to keeping all of one’s money in private hiding places and openly carrying a gun.
Most credit unions have decided against levying the debit card fees. See here for more details.
So predictable. Like water flowing downhill . . .
RE: “limits the fees that banks can levy on merchants every time a consumer uses a debit card to make a purchase . . . ”
Yes — and the results of the increased regulations on credit cards from Central Planning are . . . [drum roll] another fee.
The end result of all of this is the State attempting to close off any fees on bank cards at all, and the banks going up on checking account fees. And then the State attempting to close off checking account fees and the banks inserting another fee elsewhere.
Sure wish Central Planning had left it alone. But . . . they can’t.
Why anyone would bank with Bank of America or any big bank is beyond me. I use two smaller, local banks and they treat me like valued customer, know my name etc. At my business bank I have access to a refrigerator with drinks and snacks and can walk into teh branch manager’s office or call her any time I want. It is akin to having a personal banker. To get the level of serivice I get from my local banks from BofA or Wells Fargo I’d have to have $5 or $10 million in deposits. Not to mention the fact that most of the big banks are in finincial distress because of their poor management.
I have an account at what used to be Ft Sam Houston Military Bank and is now Bank of America Military Bank. They pay me 15 cents each time I use my debit card. No notice yet of that going away, but when it does I’ll just carry more cash and probably use a credit card for gas as my one Dave Ramsey exception.
I will just use credit cards myself. I always do. I have never carried a balance, and never paid a dime of interest, and with reward cards, I have made over $1000 over the last few years. It is nice to have the banks pay me. Right now I get 5% back on gas purchases. The next quarter I get 5% back on restaurants. Cash and debit don’t make me that kind of money. I agree with Ramsay about debt, but a credit card can be used debt free if paid during the grace period.
Granted, most Americans have demonstrated that they can’t use credit cards wisely, and if you can’t, the rewards aren’t worth the interest, but if you can use them wisely, they are a far better deal than a debit card (especially now).
There’s a **debit** card now out there that I hear Ramsey talking about that gives cash back — that sounds pretty cool.
That is interesting about cash back debit cards. I wonder what the future of debit cards is if they start charging fees.
Also, I like credit cards too because during the grace period I can make interest on the money. I know it isn’t much, but it keeps the money in my account 28 or so days longer than if it were immediately withdrawn. With cards that have a 0% introductory period (such as 12 months), I can keep my money growing interest even longer before I have to pay it off.
I will grant my approach to credit cards is definitely not your average approach, and is not for everybody. I just think it is cool to tell people that I actually make money from the credit card companies.
I must be getting old. I can remember a day when it was people who robbed banks instead of the other way around.
Banks are very limited on the amount of interest they can offer or charge – and that means they need other revenue than the difference between interest they gain from loans and interest they pay on deposits. Fees are about the only other source of income (I think).
We bank at a locally owned bank with fewer than ten branches. Their motto is “We live her too.” It makes a difference. They have fees for overdrafts and the like, but not for ordinary transactions.
My debit card was cash back until Congress passed that law cutting and limiting the debit transaction fees. They ended the cash-back program shortly thereafter. It stinks. I don’t think any bank is doing cash-back debit cards now. I’d get over $100 a year back on average and every little bit helps!
I still have free checking and free debit card usage. We’ll see how long that lasts now. 🙁
At first I thought they were talking about the case when you use your debit card as a credit card (sign for something) vs. using your PIN. Did a little research and the fee is supposed to be for any swipe. I suspect BoA will pull back, since other banks can easily get more customers by not changing their plans.
Do any of you remember how, when ATM cards were first introduced, the banks said that they would impose a fee when customers wanted to deal with a teller instead of using an ATM? The ATM’s were supposed to be extremely cost-effective, cutting down on labor costs and allowing for increased accessibility (24/7) which provided greater profit potential.
And then we were encouraged to use debit cards instead of writing checks, to eliminate the possibility of overdrafts (hah!) and make it unnecessary to carry around a checkbook. The cost to the bank of processing transactions done with checks was far, far higher than that from use of debit cards, and they wanted us to stop using “paper”. Fees on checking accounts were jumped up, as we were pressured to “go electronic”.
I can’t criticize the banks all that much; they are in business to make money, and if one source is cut off, they must look for another. I feel that the blame falls upon the well-intentioned but short-sighted lawmakers who try to deal with “symptoms” (various fees) rather than the basic issue, which is the inability of banks to maintain profit levels because of the incredibly low interest rates that the Fed has had in place for a number of years. My money-market account earns a whopping .15% APR, and the best CD I’ve found is 1.2% (for 20 years). I keep reading various items in the financial pages of the local newspaper where a 7% APR on investments is assumed for long-term financial planning, and I wonder what planet the people who come up with such figures are living on.
The best answer, IMHO – use a credit card with some kind of rewards program, and pay it off each month. Even that will probably eventually fall victim to fees of some kind, but for now it appears to be the most cost-efficient solution.
Though Sarah blames the government for everything the banks do, there is more than adequate evidence that banks are incredibly capable of doing all sorts of venal nasty things on their own. The ATM racket but one example.
Banks are just an organized crime syndicate that is much smarter than the Sopranos. If you need any evidence to that effect take a look at how they forged the documentation for tens of thousands of faulty mortgages in order to evict people.
I think the Ferengi on Star Trek had a rule of acquisition about this, “No matter how bad things get, someone somewhere is making money…”