Why Is Bank of America charging $5?
By Consumers Union on Thursday, October 27th, 2011
by Michael McCauley
Some debit card fee defenders say that banks are being forced to add these new fees because of recent regulations limiting swipe fees banks can collect from retailers. They argue that consumers are not going to be able to find free checking now that big banks can’t charge retailers as much each time debit cards are used to make purchases.
But there are plenty of banks and credit unions that still offer free checking. About half of all banks still offer free checking accounts, while even more banks will waive monthly fees if consumers meet certain criteria like using direct deposit or automatic bill payments.
Banks can still collect about 24 cents on the average debit card transaction from retailers. That’s three times the 8 cents it costs the bank to process the transaction, according to the Fed. So this isn’t about Bank of America covering its costs. It’s about hanging on to the excessive fees the bank got used to charging retailers. Only now it’s the consumer’s turn to get gouged.
Banks are actually saving money now that consumers are relying more on debit cards instead of writing so many paper checks. It cost banks far more to process a paper check than a debit card transaction.
For many consumers, the Bank of America debit card fee was the last straw. They’re fed up with banks that got bailed out with billions in taxpayer dollars that are now turning around and hiking fees. Many are moving their money to banks that don’t charge debit card fees. We think that will add a healthy dose of competition to the banking business that will benefit consumers in the long run.