Did Congress Kill the Debit Card?

[Barefootsies]

Some Americans are outraged that Bank of America intends to charge its customers a $5 fee for using their debit card. And simply switching banks might not help: others are expected to follow. While frustration over yet another bank fee is understandable, this one should surprise no one. Congress acted to cap the debit fees that banks could charge retailers last year, and banks are reacting by directly charging their customers a portion of these lost fees to make up the difference. The move could mean the end of the debit card.

The Logic Is Simple

Bank of America is actually being quite straightforward about its rationale for instituting this new fee: it blames the government. A provision from last summer's financial regulation bill promoted by Sen. Dick Durbin (D-IL) capped the fees that banks can charge retailers when customers pay with debit cards. The new rule goes into effect on Saturday. Andrew R. Johnson at the Wall Street Journal reports:

Bank of America has said it expects the caps, which the industry lobbied against for months, to erase $2 billion in revenue annually.

"The economics of offering a debit card have changed with recent regulations," a spokeswoman for Bank of America said Thursday.

The only thing surprising about this news is that anyone Congress was so blind to reality that they expected anything different. Did they really believe that banks would just shrug when their revenues declined by billions of dollars? Since they can't get as much money from customers indirectly through debit interchange fees paid by retailers any longer, they're going the direct route and charging customers for using debit.

Congress, Not Banks, Are Gouging American Consumers

That WSJ article quotes one angry Bank of America customer, saying that she feels the bank is "gouging" her. That's not quite right: she paid this fee before -- she just didn't know it. It was incorporated into the prices of the goods and services that she purchased with her debit card. The fee was then paid to banks by the retailer where she shopped. Now Bank of America is just cutting out the middle man to collect a portion of the fees. This move isn't meant to create new revenue for the bank, but to replace the revenue that Congress forbid them to collect through their old fee policies.

In a perfect world, customers would end up paying the same amount in fees as they did before through this new approach. The only difference should be that they're paying more money directly and less indirectly. That means that the prices of the goods and services they purchase ought to decline accordingly.

Unfortunately, we don't live in a perfect world. As I pointed out on Wednesday, retailers aren't cutting prices. Instead, they're pocketing the $7 billion or so they'll save in fees. While this could theoretically change in the future, they have indicated that they aren't cutting prices at this time.

So customers will end up paying more than they did before once this new law goes into effect, but not because the banks are creating a "new" fee, but because the government forbid them to make full use of their old one. This financial regulation effort will amount to a gift to retailers, courtesy of Congress.

As I also pointed out, in particular, this action by Congress will hurt low- to middle-income Americans more than wealthier Americans. Banks find it very important to cultivate relationships with their wealthier customers, because they want their high deposits and to sell them other financial services. So banks' wealthiest customers will likely escape fees like this. Instead, less affluent Americans will end up paying more than their fair share.

The End of Debit?

But luckily, customers can avoid these fees -- they just have to stop using their debit cards. They will only be charged this fee if they use their debit card during the month, according to the WSJ story. I don't know about you, but this would push me not to use my debit card in any case other than emergencies. After all, I don't face a similar fee when I use my credit card. The bank also says that ATM use won't incur the fee -- so you could just use cash.

As a result of the new regulation, debit could fade away altogether. In fact, that's sort of the best-case scenario. If people continue to rely on debit as a means for payment, then they'll ultimately be paying more unless retailers respond by cutting prices accordingly. Rather than save Americans money, Congress' effort will have cost Americans instead.

FULL STORY

[PR_Glen]

5$ a month? The average canadian will spend at least 2$ per transaction to get money from an atm, and that's only if they have spent the 9.95-15.95 monthly debit fee that waves the extra 1.50 per charge per transaction.

I'd love it if it was only 5$ a month! hehe

[AdultKing]

Originally Posted by PR_Glen

5$ a month? The average canadian will spend at least 2$ per transaction to get money from an atm, and that's only if they have spent the 9.95-15.95 monthly debit fee that waves the extra 1.50 per charge per transaction.

I'd love it if it was only 5$ a month! hehe

Same in Oz. Any ATM card is $2 per ATM transaction unless using your own bank's network, overseas use is higher.

[Tom_PM]

The article from yesterday stated that atm use would not incur the NEW fee, it didnt say there would not be seperate atm fee's, which there already are with no mention of that changing that I've seen.

Since I've had the same account for 35 yrs now, if my bank decides to jump on this bandwagon, I'll be calling them to get it waived.

[Jman]

Originally Posted by pr_glen

5$ a month? The average canadian will spend at least 2$ per transaction to get money from an atm, and that's only if they have spent the 9.95-15.95 monthly debit fee that waves the extra 1.50 per charge per transaction.

I'd love it if it was only 5$ a month! Hehe

touché!!!!

[WarChild]

I heard on the radio, sorry no source, that as a result of the legislation, Mastercard and Visa will be RAISING their interchange fees to the maximum allowable now. Doesn't make a difference to consumers, but business will feel it.

[96ukssob]

Originally Posted by PR_Glen

5$ a month? The average canadian will spend at least 2$ per transaction to get money from an atm, and that's only if they have spent the 9.95-15.95 monthly debit fee that waves the extra 1.50 per charge per transaction.

I'd love it if it was only 5$ a month! hehe

Originally Posted by AdultKing

Same in Oz. Any ATM card is $2 per ATM transaction unless using your own bank's network, overseas use is higher.

no no no... this is a fee ON TOP of what you pay now. ATMs will continue to rape you, and BofA will continue to charge a $2 fee to use an ATM. This is a "monthly service fee" sort of like if you have an account with a low balance and they charge you a maintenance fee.

fucking lame IMO

[Nikki_Licks]

Customers of Bank of America should move their monies to new institutions!

This bank is nothing but shit and have got away with fucking Americans and their customers for way too long.

I would love nothing more than to see this bank fail.

[Grapesoda]

Originally Posted by PR_Glen

5$ a month? The average canadian will spend at least 2$ per transaction to get money from an atm, and that's only if they have spent the 9.95-15.95 monthly debit fee that waves the extra 1.50 per charge per transaction.

I'd love it if it was only 5$ a month! hehe

$5 a month...? who gives a fuck

[Serge Litehead]

it's not the end of debit, it's the great milking of debit, it will affect everyone not just BoA customers.

enter bitcoin ;)

[WarChild]

Think you'll just move to another bank to avoid this? Think again. Wakovia, Chase and others are already testing similar programs. This will end up being a standard fee I'm sure so changing banks won't necessarily help.

[RebelR]

Originally Posted by bossku69

no no no... this is a fee ON TOP of what you pay now. ATMs will continue to rape you, and BofA will continue to charge a $2 fee to use an ATM. This is a "monthly service fee" sort of like if you have an account with a low balance and they charge you a maintenance fee.

fucking lame IMO

yeah.. Canadians pay per transaction, or in some cases a flat fee, I opted for the $12 flat fee per month which allows unlimited debits per month. This is of course in addition to any ATM fees. So a $5 fee per month unlimited.. where do I sign up?

[Serge Litehead]

Article about Visa & MC raising fees for small debit transactions
http://www.bloomberg.com/news/2011-0...lyst-says.html

[Barry-xlovecam]

Pass the trash ...

These fees will be in ADDITION to ATM charges. I read of one bank increasing its 'out of network' ATM fee from $2.00 to $2.50

The FED has cut the rates on the "debit card transaction skim" from .44.

http://news.google.com/news/more?pz=...OXXM &topic=h

The banks are no longer able to profit from lending so they now cannibalize the stored capital of their customers.

In time some will probably offer relief from these fees to gain market share.

[LiveDose]

I use my credit card for maximum points/miles and pay it off at the end of the cycle anyways. Still banks are always looking for an excuse to nickel and dime their customers.

Congress' intentions always backfire because their stupid egos and ignorance on financial and other matters always get in the way. Their ability to fuck up everything they touch is amazing but not surprising.

[Rochard]

Warren Buffet was on CNN and was asked about this. He just said if you have a problem with it, there are seventy thousand other banks in the US you can use.

[JustJ]

Regions Bank just added a $4 per month ATM fee. They also got rid of their free no-fee checking accounts.

[sperbonzo]

Everyone in the card industry knew that this would happen when Dick Durban wrote this bill. Every time the government gets involved like this it almost always turns out badly. Price fixing always results in either higher prices elsewhere in the chain, or reduction in service, supply and choices. it happens every time, but politicians just can't stop themselves from trying to get re-elected by appearing that they are "controlling prices", instead of letting people's freedom of choice take care of it instead.

They will never learn.


.

[TheDoc]

Direct deposit your money into the bank, pay your bills, transfer some to savings/investments, then withdraw your walking around money. Wash and repeat.

[seeric]

USAA for the win!

If you are veteran!

[TheDoc]

Originally Posted by sperbonzo

Everyone in the card industry knew that this would happen when Dick Durban wrote this bill. Every time the government gets involved like this it almost always turns out badly. Price fixing always results in either higher prices elsewhere in the chain, or reduction in service, supply and choices. it happens every time, but politicians just can't stop themselves from trying to get re-elected by appearing that they are "controlling prices", instead of letting people's freedom of choice take care of it instead.

They will never learn.


.

20 years of growing abuse, even from the "good guys", kinda kills any freedom of choice.

This price control, has opened up more choices than we had... many banks already had free atm fees at every angle (not that the price control only hit that), but now banks like BofA are going to keep trying to figure out every possible way to get another dime, and they aren't able to make billions in profits over the other banks in stupid fees... which gave them a huge marketing edge - but today that advantage is reversed. Smart business will finally pay off for those good banks.

[LiveDose]

Your other option is to find a credit union you can join.

[sperbonzo]

Originally Posted by TheDoc

20 years of growing abuse, even from the "good guys", kinda kills any freedom of choice.

This price control, has opened up more choices than we had... many banks already had free atm fees at every angle (not that the price control only hit that), but now banks like BofA are going to keep trying to figure out every possible way to get another dime, and they aren't able to make billions in profits over the other banks in stupid fees... which gave them a huge marketing edge - but today that advantage is reversed. Smart business will finally pay off for those good banks.

wow.... you really don't understand how this stuff works do you.... Or how this type of price fixing by governments ALWAYS leads to FEWER choices in the market place for consumers....


Never mind. I have a feeling this would be a long conversation, which in the end would be a waste of time, no matter which of the countless examples of the consistent damage that price fixing does to the market and consumer choice I showed to you.


*sigh*

[beerptrol]

I'll stick with my credit union

[jimmy-3-way]

Originally Posted by TheDoc

Direct deposit your money into the bank, pay your bills, transfer some to savings/investments, then withdraw your walking around money. Wash and repeat.

I'm betting if you carry a big enough balance they'll waive the fee.

[TheDoc]

Originally Posted by sperbonzo

wow.... you really don't understand how this stuff works do you.... Or how this type of price fixing by governments ALWAYS leads to FEWER choices in the market place for consumers....


Never mind. I have a feeling this would be a long conversation, which in the end would be a waste of time, no matter which of the countless examples of the consistent damage that price fixing does to the market and consumer choice I showed to you.


*sigh*

So why doesn't your free market theory work in non-regulated countries then? Yeah, not every country is super bank heavy on regs... and it's still not all flowers and butterflies.

[TheDoc]

Originally Posted by jimmy-3-way

I'm betting if you carry a big enough balance they'll waive the fee.

Personal account, they do a lot for us, I'll admit that.

Business wise, I should have moved long ago, I've just been lazy. I can use the "standard" business service, they just kill ya in fees. And if I go up to small business, they want 300k 'average' monthly balance to wave fees... yeah, that's not happening. I went with BofA years ago because they were the first to offer online wires, going into the branch and filling out wire forms for affiliates, is like shooting yourself in the head... really no reason for me not to move today, I haven't sent a wire out in like two years.

[arock10]

use credit cards who cares about debit cards

[jimmy-3-way]

Originally Posted by TheDoc

Personal account, they do a lot for us, I'll admit that.

Business wise, I should have moved long ago, I've just been lazy. I can use the "standard" business service, they just kill ya in fees. And if I go up to small business, they want 300k 'average' monthly balance to wave fees... yeah, that's not happening. I went with BofA years ago because they were the first to offer online wires, going into the branch and filling out wire forms for affiliates, is like shooting yourself in the head... really no reason for me not to move today, I haven't sent a wire out in like two years.

Yes and yes.

The threshold for getting the VIP treatment on a personal account is really low, $5-$10k I think and you get free everything: online bill pay, automated payments, free cashier's checks, free trades etc, etc.

[porno jew]

Originally Posted by PR_Glen

5$ a month? The average canadian will spend at least 2$ per transaction to get money from an atm, and that's only if they have spent the 9.95-15.95 monthly debit fee that waves the extra 1.50 per charge per transaction.

I'd love it if it was only 5$ a month! hehe

yeah stupid, EH?

[Ron Bennett]

Originally Posted by sperbonzo

Everyone in the card industry knew that this would happen when Dick Durban wrote this bill. Every time the government gets involved like this it almost always turns out badly. Price fixing always results in either higher prices elsewhere in the chain, or reduction in service, supply and choices. it happens every time, but politicians just can't stop themselves from trying to get re-elected by appearing that they are "controlling prices", instead of letting people's freedom of choice take care of it instead.

The processing networks, to some extent, are natural monopolies and hence need to be regulated - merchants don't really have any choice. The price controls is on the network side. Banks are still free to charge whatever they want for banking services, such as for example, BoA new $5 debit card fee.

There are many examples of price controls that help protect customers, such as those on gas, electric, and water service in most places...

And while on the topic of price controls - Comcast internet users should be thankful the government stepped in with temporary price controls when Comcast merged with Universal and required them to keep internet service rates about the same as now and not reduce the 250 GB/mo cap for at least three years.

Getting back to the debit card fee limit bill - from my understanding, smaller card issuers are exempt from the new limits, as well as, issuers of government benefit debit cards (unemployment, welfare, etc).

Ron

[Adult Insider Dave]

They have other plans for debit cards, the 5.00 fee is on their base level debit card that they probably lose their ass on. I agree with Warren, if you got a problem with BoA, move banks (and probably end up paying more).

[CYF]

Originally Posted by LiveDose

Your other option is to find a credit union you can join.

THIS.

I joined a credit union a couple years ago for my personal stuff. No fees, and they give me cash back on debit card purchases.

[epitome]

Originally Posted by Nikki_Licks

Customers of Bank of America should move their monies to new institutions!

This bank is nothing but shit and have got away with fucking Americans and their customers for way too long.

I would love nothing more than to see this bank fail.

I guess you didn't bother reading ... Bank of America is the first and other banks are expected to follow.

[PR_Glen]

Originally Posted by jimmy-3-way

I'm betting if you carry a big enough balance they'll waive the fee.

I'm betting if you carry a big enough balance you wouldn't likely give a shit about the 5 bucks either!

Originally Posted by porno jew

yeah stupid, EH?

That would depend on your perspective.. The few banks that we have available to put our money in have been making record breaking profits for years now so i'm sure they are happy about it hehe


does that make them a good investment you think?

[Atticus]

Originally Posted by TheDoc

Direct deposit your money into the bank, pay your bills, transfer some to savings/investments, then withdraw your walking around money. Wash and repeat.

So instead of just paying a measly $5 monthly fee you would rather make multiple trips to an ATM and carry around large amounts of cash? Plus deal with all of the coins you would receive back in change? You plan on carrying around your Grandma's coin purse as well?

A. If you're that concerned with the $5 fee just use the card as a cc. As long as you don't enter in a PIN during the month you wouldn't get charged.
B. It's $5 bucks! Jesus, you would think after reading this thread it was $500.

[TheDoc]

Originally Posted by Atticus

So instead of just paying a measly $5 monthly fee you would rather make multiple trips to an ATM and carry around large amounts of cash? Plus deal with all of the coins you would receive back in change? You plan on carrying around your Grandma's coin purse as well?

A. If you're that concerned with the $5 fee just use the card as a cc. As long as you don't enter in a PIN during the month you wouldn't get charged.
B. It's $5 bucks! Jesus, you would think after reading this thread it was $500.

$5 or $60 a year, times how many years, and assuming it stays $5? Either way, it's my money... who cares if it's 1 cent, $1 or more... it's my god damn money and it isn't going to anything that benefits ME!!!!

And multi trips? What am I an idiot? I also have a safe.

$200 a week covers our groceries, entertainment, coffee, and gas.

I love change! I buy swisher's with it.

a) And I could just change banks, or keep doing what I've been doing.
b) No, it's MY money, that logic is simple... if you wish to give people money, give me $60 a year and give it to my kids to play on the penny stocks with.

Would you like my kids paypal address?

[SleazyDream]

Originally Posted by bm bradley

$5 a month...? who gives a fuck

ok, can i take on $5 a month to everything you pay for? send it all to me, every month!

[LiveDose]

Originally Posted by CYF

THIS.

I joined a credit union a couple years ago for my personal stuff. No fees, and they give me cash back on debit card purchases.

Exactly I've kept my credit union account open from my college days in upstate NY and it is by far the best thing going on. Everything you described as well.

Find a way to open up an account at a credit union folks.

[Atticus]

Originally Posted by TheDoc

$5 or $60 a year, times how many years, and assuming it stays $5? Either way, it's my money... who cares if it's 1 cent, $1 or more... it's my god damn money and it isn't going to anything that benefits ME!!!!

And multi trips? What am I an idiot? I also have a safe.

$200 a week covers our groceries, entertainment, coffee, and gas.

I love change! I buy swisher's with it.

a) And I could just change banks, or keep doing what I've been doing.
b) No, it's MY money, that logic is simple... if you wish to give people money, give me $60 a year and give it to my kids to play on the penny stocks with.

Would you like my kids paypal address?

It does benefit you. It's a service that allows you to purchase something without having to carry around cash. And how exactly are you taking $800 out of an ATM each time? You'd have to take at least 2 trips on separate days or go into the branch. I think it's well worth $5 a month to avoid the hassle of dealing with those trips and having to make all cash purchases.

And on a side note. You have kids and $200 a week covers groceries, gas and entertainment?? Your night outs must be a real joy.

[Barry-xlovecam]

I just got back from my bank, a regional bank in the USA -- no plans to charge for debit cards I was told. Furthermore, I received a renewal debit card in the mail and the was no reference to monthly maintenance or fees other than replacement in the terms booklet enclosed.

I closed my deposit and demand (checking) accounts with the B of A years ago over a disagreement of bank "policy."

There are alternatives to the so called "money center banks." FYI, I read that CitiBank will not be charging these debit card fees.

[Atticus]

Don't get me wrong, there are plenty of things to get pissed off about banks, especially BofA. Often local regional banks are a much better choice.

However a $5 a month debit card fee (only if you use the debit option) is not one of them. Especially when you can use the same card to access funds at an ATM or use as a cc.

[TheDoc]

Originally Posted by Atticus

It does benefit you. It's a service that allows you to purchase something without having to carry around cash. And how exactly are you taking $800 out of an ATM each time? You'd have to take at least 2 trips on separate days or go into the branch. I think it's well worth $5 a month to avoid the hassle of dealing with those trips and having to make all cash purchases.

And on a side note. You have kids and $200 a week covers groceries, gas and entertainment?? Your night outs must be a real joy.

The card is free right now, and I still use cash.

Well, the branch is about 3 minutes from me, I go to deposit company checks anyway, and my grocery store is next to it.

Yeah, the night life of a 6 and 7 year old really breaks us AND we have money left over too!

And it teaches my kids the value of money, how to count it, and so on.. plastic, does not!

Oh, and it buys me beer and cigars for the week as well.

[KillerK]

Originally Posted by Atticus

It does benefit you. It's a service that allows you to purchase something without having to carry around cash. And how exactly are you taking $800 out of an ATM each time? You'd have to take at least 2 trips on separate days or go into the branch. I think it's well worth $5 a month to avoid the hassle of dealing with those trips and having to make all cash purchases.

And on a side note. You have kids and $200 a week covers groceries, gas and entertainment?? Your night outs must be a real joy.

I can take out $1,000 per trip to the ATM.

[Captain Kawaii]

Bank of America = Bank of Italy
- I would expect nothing less from a country that has someone like Berlisconi for PM/Pres. LOL

Move to a Credit Union. More money for you, less for Banks, CU's thrive. Its a WIN-WIN

[mountainmiester]

Go banks and fuck us it seems again. Let's help big business and screw the average American...rinse and repeat until we get some new idiots in DC, then we get to start this all over again.

[TheDoc]

Originally Posted by Atticus

Don't get me wrong, there are plenty of things to get pissed off about banks, especially BofA. Often local regional banks are a much better choice.

However a $5 a month debit card fee (only if you use the debit option) is not one of them. Especially when you can use the same card to access funds at an ATM or use as a cc.

I see you live in Vegas... we moved from Vegas to Tucson after we had kids.

It's wayyyyy cheaper to live here than in Vegas, every aspect of life is cheaper.

And honestly, the amount of free shit to do here, is off the chart. I can do something every single night, 7 days a week, and not spend a dime.

Totally different places man.. trying to figure out how, when you live in Vegas, isn't going to work out in your head no matter how much you try.


Btw.. my veggies and fruits cost us $15 a week, and we have to give some away every week or it will go bad, it's that much food. Kinda put the food cost into perspective for ya. Food coop btw..

[will76]

Originally Posted by Atticus

It does benefit you. It's a service that allows you to purchase something without having to carry around cash. And how exactly are you taking $800 out of an ATM each time? You'd have to take at least 2 trips on separate days or go into the branch. I think it's well worth $5 a month to avoid the hassle of dealing with those trips and having to make all cash purchases.

And on a side note. You have kids and $200 a week covers groceries, gas and entertainment?? Your night outs must be a real joy.

I feel sorry for the gal he is married to

I would show her a lot better treatment then that

[Atticus]

Originally Posted by TheDoc

I see you live in Vegas... we moved from Vegas to Tucson after we had kids.

It's wayyyyy cheaper to live here than in Vegas, every aspect of life is cheaper.

And honestly, the amount of free shit to do here, is off the chart. I can do something every single night, 7 days a week, and not spend a dime.

Totally different places man.. trying to figure out how, when you live in Vegas, isn't going to work out in your head no matter how much you try.


Btw.. my veggies and fruits cost us $15 a week, and we have to give some away every week or it will go bad, it's that much food. Kinda put the food cost into perspective for ya. Food coop btw..

I wasn't referring to the night life of a 6 year old. My 4 year old 'entertainment' doesn't break the bank either. Give him a RedBox movie once a week and he's happy. I was more referencing your entertainment. Do you never go out to dinner, see a movie, have a drink? Never take your wife out? Never buy a gift? Never surprise her with flowers? Don't take vacations?

It might be cheaper to live in Tucson versus Henderson however I can't imagine a 6 pack of beer costs that much less. Nor a gallon of gas. There is zero way I could spend $200 a week on gas and groceries alone, let alone anything else.

[seeric]

Originally Posted by sperbonzo

wow.... you really don't understand how this stuff works do you.... Or how this type of price fixing by governments ALWAYS leads to FEWER choices in the market place for consumers....


Never mind. I have a feeling this would be a long conversation, which in the end would be a waste of time, no matter which of the countless examples of the consistent damage that price fixing does to the market and consumer choice I showed to you.


*sigh*

I love price fixing conversations. I was friends with a lawyer in San Diego that was in on the price fixing of eggs and milk back in 1995 or so. That shit drove the guy bat shit crazy. Case went on for something like 12 years. I know more than I every want to know about price fixing. It's so true what you say though.