Guest Blog Ed Cook: Debit Card Fees and other Banking Items – Watch your pockets

OK, a show of hands please who is surprised that Bank of America is going start charging fees to for Debit card use?  Anyone…didn’t think so.

I know a few bankers, at smaller banks, well enough to talk to them about subjects such as fees and they feel that Congress really stuck it to the small banks and gave the Wall Street investment firms and huge banks a free ride.  The big bank abusers that in large part caused or aggravated the financial crisis in 2007 and 2008 got less new regulation from the Dodd-Frank Bill than “Home Town Bank USA”, but the fees will be coming from all banks.

Debit card fees are just the start.  BofA is in the headlines now but they are not the first.  A number of other large banks started the fees a while ago but the fee is less and they have marginally fewer customers.  Among them are JP Morgan Chase, SunTrust and Wells Fargo.

There will be more changes too.  In the coming years there will be more mergers/takeovers of small banks by larger banks.  Because interest rates are so low now, the return banks get now is very low.  The asset base has to be bigger to make a good Return on Assets so banks, will have to merge to survive.  I don’t want this to become a finance lesson but those are the facts.

When the bill was passed in early 2010 it smelled funny to me.  The summaries did not show me that the Investment Bankers were going to have to substantially change the way they did business and faced no more regulation than “Home Town Bank USA”.  The difference was that “Home Town Bank” was going to have to hire additional people just to take care of the new regulations while facing loss of revenue.  The big banks and Investment Banking firms already had people in place to handle regulations and did not have revenue reductions to any extent because they could go into more profitable lines of business than “Home Town Bank” is permitted to.

The namesakes of the bill were not giving me confidence either.  That same year, Senator Christopher Dodd, took his millions and his campaign funds and rode off into the sunset, and retired from Congress.  Barney Frank, the man, who, in 2003 said that Fannie Mae and Freddie Mac were in good shape and did not need additional regulation, was the other “statesman” putting his name on the bill.  I confess I have never been a Barney Frank fan.  I live in the same state as he, and my congressional district is contiguous to his, but he is so far to the left, he needs look right with binoculars to see the Democrat Left Wing.  Those in Congress refer to him as “Brainy”, I don’t see it.

The question I have is, ‘Did Congress expect anything else?’  Did they expect banks to just roll over when Debit Card revenue was taken away? Billions of dollars by the way.  Banks used to get around 44 cents per swipe paid by the retailer selling the goods or services.  The Fed recently reduced that to around 21 cents as mandated by the Dodd-Frank Bill.  The ideal would be now you would see lower prices in stores.  Anyone see lower prices lately…anyone…didn’t think so.  Did Congress think prices would be reduced at retail?  While you have been paying the fee all along via the retailer who paid the bank, now you will be paying both the retailer AND the bank.

Other things your local or huge bank has done for free in the past will soon be charge-for items.  You want your coins rolled?  That will be 10% of the value please.  Interacting with a Teller is a chargeable service at some banks already but will be chargeable at more places going forward.

So lets recap. There will be charges to use an ATM, charges to talk to a teller, a charge to use a debit card…for the amount of interest you get in a savings account now putting your money under the mattress looks better all the time.  As I said in the title, watch your pockets!


One thought on “Guest Blog Ed Cook: Debit Card Fees and other Banking Items – Watch your pockets

  1. I have long wondered why we allowed ourselves to be put in the position where the people we loan our money to for investment (banks) can charge us for that use and all the costs of tracking and managing that loan then and convince us that they are better than the next bank. They pay interest, but the offsets are astounding. Nice informative piece ED. I will be directing some friends to this article.

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