Bank of America the largest bank in the United States and without a doubt the bedrock of Charlotte’s designation at the biggest financial hub, second only to New York. Throughout the last few months, Bank of America has been saddled with litigation, a crippling mortgage balance sheet, and a declining stock price (among blue chip stocks, the S&P500 lists BAC as the worst performing of the 3rd quarter). In a controversial move, the company decided to start implementing a fee structure for debit card usage. Here is the debit-card fee at a glance:
• Customers will pay $5 each month they use a debit card for a purchase
• No charge for using BofA automated teller machines
• Fee to be phased in starting early next year
• Doesn’t apply to customers with, for instance, a BofA mortgage or $20,000 in combined BofA and Merrill Lynch accounts
This comes on the heels of a new federal regulation called the The Dodd-Frank Act’s Durbin amendment, due to go into effect on October 1, which caps fees banks can charge merchants for processing debit card transactions at 21 cents per transaction from an average of 44 cents, potentially costing banks billions of dollars.
What this means is that Bank of America is shifting part of the fee obligation from merchants to consumers. In 2009, the company saw 19 billion in revenue from those fees so, undoubtedly they want to maintain that financial position; but at the cost to the consumer? More specifically, the ones who have the least amount of liquidity (less than $20,000). Seems a bit unfair, but that is just my opinion and at least one senator agrees:
Senator Dick Durbin of Illinois responded bluntly to Bank of America’s announcementL “After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers,” Durbin said Thursday. “It’s overt, unfair and I hope their customers have the final say.”
Many people may be unwilling to switch banks because of the hassle and especially in light of the fact that Wells Fargo and Chase are testing this method out themselves. However, if banks start nickel and diming you over debit card transactions then it becomes a slippery slope. Five dollars a month may not seem like much but that amounts to $60 a year and over time those fees can really add up.
So what are consumer’s options?
I have always been a huge proponent of credit unions because of their low fee structure. Charlotte has several, from Charlotte Metro Federal Credit Union, North Carolina State Employees Credit Union, and Truliant Federal Credit Union just to name a few. Most credit unions offer the same services as the big banks (online banking, business/personal loans, and ATM access) but without all the fees. This is because credit unions are not-for-profit companies where the shareholders (i.e. account-holders) are the owners of the credit unions. There is even proxy voting where you, the consumer has a say in some business decisions. Needless to say, the caveat is that you have to be a member in order to open an account. Membership criteria is not static and differs for each credit union.
It’s your money; tell big banks through action that their policies are unacceptable.