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Increased Debit Card and Banking Fees: The Cost of Regulation?
Heartlash
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Bank of America recently announced they will be introducing a $5 monthly fee for debit card usage. They're not alone, as many other major banks have been experimenting with new revenue generating measures, including revoking rewards, ATM fees, service fees, etc.
They claim these moves are to offset the costs associated with the Dodd-Frank legislation passed in the aftermath of the 2008 crash. In particular, they cite the new limit on transaction fees for merchants when customers use debit cards. The new limit, which is roughly $0.24 (the current average is around $0.44 per transaction), will cost the banking industry an estimated $6.6 billion annually.
Their response has been to offset that loss by passing the cost to consumers directly.
The main question is, are they justified in doing so? Particularly in this era of record profits? Likewise, is the regulation itself to blame? If so, is it worth this cost to consumers?
You can read more about it all here.
EDIT:
Looks like there's already a thread for this, sorry: http://forums.penny-arcade.com/discussion/149321/an-angry-consumer-banking-thread
If a mod could close or merge that would be great.
They claim these moves are to offset the costs associated with the Dodd-Frank legislation passed in the aftermath of the 2008 crash. In particular, they cite the new limit on transaction fees for merchants when customers use debit cards. The new limit, which is roughly $0.24 (the current average is around $0.44 per transaction), will cost the banking industry an estimated $6.6 billion annually.
Their response has been to offset that loss by passing the cost to consumers directly.
The main question is, are they justified in doing so? Particularly in this era of record profits? Likewise, is the regulation itself to blame? If so, is it worth this cost to consumers?
You can read more about it all here.
EDIT:
Looks like there's already a thread for this, sorry: http://forums.penny-arcade.com/discussion/149321/an-angry-consumer-banking-thread
If a mod could close or merge that would be great.
My indie mobile gaming studio: Elder Aeons
Our first game is now available for free on Google Play: Frontier: Isle of the Seven Gods
Our first game is now available for free on Google Play: Frontier: Isle of the Seven Gods
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The UK seems to have much heavier regulation around consumer finance than the US does (or at least, US banks seem to get away with much more than UK banks are able to) and it's pretty rare to see these kind of fees applied. Part of it is probably that some fees aren't permitted, or at least there must be an option to access the service without incurring fees, and also that UK banks haven't imposed such fees historically and nobody wants to be first since if they did there's no reason all their customers wouldn't immediately switch to another bank.
I personally never use debit, I'm a cash only sort of person. So, this doesn't affect me in the least, and it will only make me feel more justified in my hatred of such things.
Debit is cash though...
And honestly, a $5 a month fee? Meh. It's the cost of convenience. I'd rather pay it then have to find an ATM that doesn't charge me a fee every time I need to buy something and don't have that much cash on hand.
No, it won't.
My experience with banks is that the $5 fee is testing the waters. Every fee my old bank instituted seemed to climb continuously, inching up every month. If customers don't rebel, it'll be $100 in a couple years.
I'm on this side of this, and a BoA customer (until we get closer to the charges starting, then I will be a "Whatever Bank Screws Me Over Less" customer).
It really feels like a "The government DARES think they can cut into our ungodly profits!? Quickly! Screw over their constituents!" move from the banks. I'm praying the anger from this doesn't end up going towards the Dodd-Frank bill and lands on the banks and we see something positive on the regulations side out of this, but I'm also praying for a pony, and feel the horse is more likely.
If you're in a business, there is a point of optimal pricing, which is the pricing that the market will bear without losing more money from lost customers from a price increase than you'll gain from the increased revenue from the price increase.
There is no situation in business where costs, either fixed or variable, should have any affect on pricing strategy. Either you are at the optimum level or you aren't and should raise or lower the price to meet the optimum level. It is possible to be in a situation where your costs outweigh your revenue, but no pricing change is going to fix that unless the business wasn't pricing correctly in the first place.
So what they really mean is "We think people will pay $5 more a month for banking, so we're charging them for it".
Edit: What this is actually from is that banks really like credit cards and hate debit cards because it's a lot easier to lose track of spending, so it's a "Stop being financially responsible" charge.
EDIT: WHOOPS
Didn't see the pre-existing thread: http://forums.penny-arcade.com/discussion/149321/an-angry-consumer-banking-thread#Item_33
If a mod could close this and direct people there that would be awesome. Sorry.
Our first game is now available for free on Google Play: Frontier: Isle of the Seven Gods
Why do I feel like you're grossly exaggerating?
In the U.S., consumers place a higher premium on the convenience of debit/credit, and so we were more willing to pay a slight price mark-up in exchange for the opportunity to purchase a pack of chewing gum on credit. We conduct more of our transactions in credit/debit, and we're less likely to carry cash on our persons. Which is not entirely a good thing, as most Americans are already over-leveraged on their electronic transactions (CNN Money reported that the average American household with at least one credit card is carrying an average of $10,700 in debt).
I hope B of A doesn't lose more customers over these fees because their troubles are hurting the NYSE enough already, but if it means more people cancel some of their cards and stopped paying surcharges for small purchases, I think it might have a net positive effect for the American consumer.
The main reason the dow jones (not the entire market) is doing so well is because the economy tanking, the banks failing and the government increasing expenses and regulation (health insurance and the like), tons of companies are failing that are not in the Dow Jones which is only the 500 LARGEST companies on the market. The ones at the top because they have the cash flow and reserves to weather the depression, are only going to get stronger because the lesser competition cant afford to keep up and is closing so the larger companies DO get bigger because they absorb the customers but at the cost of the overall market and choice shrinking. You cant use the Dow to measure the economy like you use to when the number of companies existing on the market was much smaller then it is now.
Practically every work day for the last 7 years I've come into my job, looked at my companies stock price on the web page and usually clicked to look at the articles involved to see why we went up or down, and on the front page of yahoo financial they have this bullshit headline 'stocks higher due to XXX' or 'stocks lower due to XXX' (And yes i ment to put the same thing in both cases). I also love the 'stocks fall because of fears of recession looming'. I am convinced at this point we would be better off if they would just admit the obvious that we are IN a recession/depression and stop the politically correct pandering and softening the blow shit that is according to these articles causing the sudden shifts. Declare we are in a recession, let the market fall on that news, then work to get out of it,dont pretend that we arent.
It'll never get that high, but I can see $100 a year being a thing.
The thing is that the phrase "in a recession" has a very specific meaning. Sort of like the phrase "falling out of an airplane." Both are bad; you don't want to be in a recession, and you certainly don't want to fall out of an airplane, either. However, just because both things are bad doesn't mean that no longer existing in that state is automatically good again; if you are no longer falling out of an airplane, that doesn't mean that your troubles are over, it means that you just smacked into the pavement at terminal velocity. Likewise, not being in a recession isn't supposed to convey to you that things are automatically better since the very worst day of the recession is the one right before the recovery begins, and every day after that sucks about as bad or maybe, if your lucky, just a little bit less.
Nope. It's a thing. This is from 2009:
http://www.mint.com/blog/saving/bank-fees-still-on-the-rise/
Based on a survey conducted in August, Bankrate found that, compared to last year:
· NSF charges on bounced checks increased 2.1% to an average of $29.58.
· Tiered overdrafts, which increase charges at the second or fifth bounce over 12 months, now average $33.88 and $36.19. (Some banks admit to processing the largest of multiple payments first to rack up more charges.)
· ATM surcharges rose 12.6% to an average of $2.22. (Banks increasing the fee outnumbered those reducing 7-to-1.)
· Monthly service fees for interest bearing accounts were up 5% to a record average of $12.55.
It's probably a lot closer to $0.0000000000000001 per transaction. They're just ornery that the legislation forced them to either gouge less, or split the gouge between the consumer and the retailer instead of foisting it all on the retailer.
Yes, I never said "fees don't rise", but to imply they're increasing them every month is silly.
I approve of this sentiment entirely. You know what the difference is between the impoverished and everyone else? Impoverished people pay more and higher fees on all of their financial transactions. Need a loan but you have bad credit? Pay a higher interest rate or go to a pawn shop. Need to pay by check but you don't have enough money to have your own checking account? Go to a 7-11, take out a money order and pay a $3 surcharge. Want to cash your own pay check? Go to a check cashier and pay a percentage of the check amount.
If you actually have money, all of that shit is supposed to be free; their revenues are supposed to come off the interest they make on your principal or on the interest you pay for the loans they front you. I already pay my mortgage on time, I carry no balance on my credit card, and I have savings. My bank shouldn't be treating me like I'm a migrant farmhand.
yeah, they'll just do one big increase each year.
-Increased revenue
-Get to blame it on the regulation
Consumers, by and large, are already known to be too silly to go to often readily-available credit unions.
Don't worry, like Cable and Cell packages, it'll be bundled up with 5 other services and touted as a Premium Service.
You're not paying $120 per year (at convenient $10 per month installments) for ATM service! You're also getting X (that you don't use), Y (that you might use once per year) and Z (that's currently free, but most people don't even know about it, let alone use it, so let's just call it new and run with it).
I've always shook my head sadly that banks are all "If you can afford it, we won't charge you .... but if you can't, you best prepare to pony up"
Most banks (at least that I know of) do this now -- as long as you have a certain amount of money in a checking or debit account, they won't charge you a fee because they can treat that balance as principal on which they generate interest. Absent that principal, they have no way of making money on your account unless you happen to have a mortgage or a business loan with them or something of that nature.
Most Americans save nothing, so I can understand the source of the fees. If you're lousy with your money, and you want the convenience of being able to stroke out a check or swipe a credit card, you're going to have to pay for that somehow. If these fees encourage more individual savings or for consumers to seek out ways to minimize their convenience surcharges, that's a net benefit to the consumer.
One of the explanations offered when these fees first appeared was that the bank's wealthier customers objected to "supporting" lower income clients, so the banks instituted fees to allow them to offer better deals for their premium clients. In retrospect, that's an apt metaphor for the entire economy right now.
It's more, "If you put enough of your money into our bank that we can make a profit off your money, we won't charge you."
Americans are saving so much money now that banks are refusing to roll over some CDs.
They're trying to force people back into the market where they can lose money to the big financials in the stock market russian roulette-for-the-small-investor bear market we have now.
To be fair, there really isn't a lot of upside to an account that sloshes between $0 and whatever 1 paycheck equals(normally only until bills get payed a few days post-pay day). Even If a bank could make 10% on every dollar deposited, an account that averages a couple hundred bucks...probably ends up as a loss-leader in the hopes you won't always be poor and may stick with them since you've had them for years when you are not poor and have a mortgage etc.
Let 'em eat fucking pineapples!
The other exception ought to be "if you have a long term loan with us on which we're already making a profit, we won't bother charging you for this other stuff." Most of the terms on corporate accounts are very, very favorable because the bank wants to keep that company's business in the event that it wants to take out future loans to expand its operations.
Whats you're address...I've uhh been meaning to start my own money pile, and would really like to check yours out for some ideas on how to get mine started?
It's funny, I was having a very similar conversation with a friend who is a part time actress on a similar topic.
She was commenting on how she'd been given sunglasses for free at an event or something, and they're ~$500 in the stores. We noted how interesting it was that situations like this exist, where the people who need the help the least (she's not wealthy or anything, shares an apartment with a room mate, but makes good money here at work and on side gigs) are often thrown items and services, whereas those who could use the resources more (greater need/lower standing that is) were less likely to receive it.
Sort of a counter-intuitive "the less you need the stuff the more likely you are to get it" situation. I get that people who are wealthy don't stay that way by giving up piles of cash unnecessarily, but it's always struck me as a funny/sad dichotomy. [/rambling]
I was going to bail on Wells Fargo for either USAA or Navy Federal, but then Wells was like "Oh but we will give you everything for free because you have money."
So that's fine. The instant they change that policy, I'm gone. They exhausted all of my customer loyalty when I was on deployment and they kept turning off my credit card and my debit card while I was stuck in third world countries without reliable phone service.
I've had the following happen to me multiple times:
1) Use credit card for something
2) Go to credit card website, pay balance in full
3) Next month, do not use card, do not receive bill
4) Next month, receive bill with a penalty fee for balance past due
I don't know how that works, or care. I stopped using my credit cards unless I have to buy a plane ticket.
It looks like around 5% right now on the PSAVERT, but that's primarily because deleveraging is also qualified as personal savings and also because GDP necessarily shrank during the recession (it being a recession and all), so each dollar saved also represented a larger chunk of the overall pie.