Bank of America To Charge $5 Monthly Fee For Debit Card Usage

[Razgovory]

By all means, lets let the banks do what they want.  Then all of them can end up like Washington Mutual.

I'm very heartened to learn that capping debit card fees will prevent any further bankruptcies.  Perhaps it would make sense to eliminate federal deposit insurance now.

You wish.  I'm suggesting that perhaps we shouldn't listen to the Free market fundamentalists when the smoke of the last financial inferno caused by their policies is still stinging our noses.  In other words, you, Greenspan, and Phil Gramm have done quite enough already.  We don't need advice right now.

[Admiral Yi]

You wish.  I'm suggesting that perhaps we shouldn't listen to the Free market fundamentalists when the smoke of the last financial inferno caused by their policies is still stinging our noses.  In other words, you, Greenspan, and Phil Gramm have done quite enough already.  We don't need advice right now.

Kill Raz, Kill!.

No I don't wish.  For one thing, capping debit card fees does absolutely nothing to prevent banks going under.  That and similar "consumer protection" provisions of the financial services reform bill were included *not* to reduce the chances of bank insolvency but to throw meat to the populist idiots who were demanding that the banks be punished for committing evil and insisting that since Wall Street got so much free money (that they paid 15.5% on) that Main Street deserved some presents too.

If you think that reducing bank profitability somehow decreases their risk of insolvency you need to start again from the beginning.

[stjaba]

I have a Bank of America account. Rather than changing banks, I am going to stop using my debit card and just use my non-BOA credit card for all purchases and just pay it off every month.

[Faeelin]

You can thank Messrs. Frank, Dodd, and Durbin plus all the other clowns (Democrat and Republican) who voted for the bill and/or amendment.

Why would I do that?

Have you been following bank of america lately? It's down what, fifty percent since January? With an Eight billion dollar loss in July?

Even before introduction of the Durbin amendment's rules on debit fees, Bank of America's fee income was dropping at its deposits and card services units. The bank's deposits unit reported fee income of $1 billion in the second quarter of 2011, down 34 percent from $1.5 billion a year before.

Card services, which includes the bank's credit and debit card operations, reported fee income of $1.9 billion, down 23 percent from $2.5 billion in second quarter 2010.

http://www.reuters.com/article/2011/09/29/bankofamerica-debit-idUKS1E78S16Z20110929?type=companyNews

No, the economy probably has nothing to do with it. Tis Dodd Frank's doing!

So, foreign languishites, what do you guys pay to use your debit cards?

[OttoVonBismarck]

There was a period of time maybe 10+ years ago when I used a check card/debit card for purchasing, but by and large now I almost never use either.

I have an American Express card that I use for 95% of my card-based purchases, and a Visa credit card that I use in places that don't take the AmEx.

The reasons are legion:

1. While debit cards aren't as unprotected as some say, it is true that in the case of fraud your checking account is wiped out while the bank fixes it. With credit card fraud you just have a big debt ran up until the credit card company takes care of it, but you still have your "real" money and you're still going to be able to buy groceries and pay the mortgage while it gets straightened out. With credit cards, once it is straightened out they make you good in full. With some banks I know that at one point you might eat like the first $50 in loss due to fraud, but I can't remember if that's true anymore.

2. By doing all your card-based purchasing on a credit card, at the time you pay it off (in full) each month, it's basically just one payment from checking. So instead of having to actively worry about your checking account balance because you're running tons of small transactions per month, you're only hitting it with the one fat transaction once a month (plus a few utility bills and mortgage/loan payments you can't make with a credit card.) Some would counter that if you just keep a huge cushion of funds in your checking you don't need to actively worry about your balance. Well, I think keeping anything more than a minor cushion in checking is stupid, it's a bad place for money to live.

3. While minor, there are things like frequent flyer miles and etc you get for using a credit card.

There's really no reason to use a debit card for daily purchases.

Finally, anyone can get access to a great bank that gives you free ATM use anywhere and no bullshit fees: USAA. Yes, USAA is primarily used by military or retired military for auto insurance, but they have a personal banking unit that is open to anyone. You do need to have some military affiliation to get their auto insurance, but their banking is 100% open to anyone. I bank with USAA and this is the deal:

-They have one physical branch somewhere in Texas
-You can deposit checks or cash through the mail, they have prepaid envelopes for this. I probably wouldn't deposit cash through the mail, YMMV. That's the one hassle with the account is lack of easy ability to deposit cash.
-You can withdraw money from any ATM in the country and USAA charges 0 fees. However, as we all know, some (most) ATMs charge a fee on top of the fee your bank normally charges. Yes, you still get hit with that charge, however USAA will, at the end of the month, refund any such fees that you incurred. Further, there is a network of ATMs that are totally free to USAA users and when you withdraw w/a USAA card from these machines they won't even charge you that fee upfront. Most of these ATMs are in convenience stores (lot of Go-Mart and 7/11 have them.)
-Obviously any online purchases you wish to make are as easy as with any other bank.

[Admiral Yi]

You can thank Messrs. Frank, Dodd, and Durbin plus all the other clowns (Democrat and Republican) who voted for the bill and/or amendment.

Why would I do that?

Have you been following bank of america lately? It's down what, fifty percent since January? With an Eight billion dollar loss in July?

Even before introduction of the Durbin amendment's rules on debit fees, Bank of America's fee income was dropping at its deposits and card services units. The bank's deposits unit reported fee income of $1 billion in the second quarter of 2011, down 34 percent from $1.5 billion a year before.

Card services, which includes the bank's credit and debit card operations, reported fee income of $1.9 billion, down 23 percent from $2.5 billion in second quarter 2010.

http://www.reuters.com/article/2011/09/29/bankofamerica-debit-idUKS1E78S16Z20110929?type=companyNews

No, the economy probably has nothing to do with it. Tis Dodd Frank's doing!

Are you suggesting that businesses set their prices so that profit will be a constant?

You also seem to have missed the part of the story that talks about other banks implementing monthly fees.

[Faeelin]

Are you suggesting that businesses set their prices so that profit will be a constant?

No, surely they would seek to maximize them, right? It's not clear why Dodd Frank standing on its own would play a role here, since nothing would have stopped them before Dod Frank's passage from implementing this sort of fee as well. One might as well conclude that banks are implementing debit card fees because the changes of any legislation stopping them are nil.

[Admiral Yi]

No, surely they would seek to maximize them, right? It's not clear why Dodd Frank standing on its own would play a role here, since nothing would have stopped them before Dod Frank's passage from implementing this sort of fee as well. One might as well conclude that banks are implementing debit card fees because the changes of any legislation stopping them are nil.

Exactly.  Nothing was stopping them from charging a monthly fee before the passage of Dodd Frank, which suggests Dodd Frank has something to with the decision.  More precisely, the fact that at 24 cents a debit they will lose money.

[Faeelin]

Maybe it's just me, but I would imagine that banks would like to make as much money as possible.

Prior to Dodd Frank, they could have charged merchants fees and also debit card holders a fee. Why didn't they?

[Admiral Yi]

Maybe it's just me, but I would imagine that banks would like to make as much money as possible.

Prior to Dodd Frank, they could have charged merchants fees and also debit card holders a fee. Why didn't they?

They did charge debit card users a fee.  A per transaction fee.

[Faeelin]

Maybe it's just me, but I would imagine that banks would like to make as much money as possible.

Prior to Dodd Frank, they could have charged merchants fees and also debit card holders a fee. Why didn't they?

They did charge debit card users a fee.  A per transaction fee.

They charged the merchants the fee, right? Why did they not charge both the merchant and the card-holder a fee?

[Admiral Yi]

They charged the merchants the fee, right? Why did they not charge both the merchant and the card-holder a fee?

Because of Dodd Frank?

Don't really understand where you're trying to go.

[Faeelin]

They charged the merchants the fee, right? Why did they not charge both the merchant and the card-holder a fee?

Because of Dodd Frank?

Don't really understand where you're trying to go.

Okay, let's presume that banks want to make as much money as they can. You'd agree with that, right?

Why were they not charging a fee prior to Dodd Fank for each transactions (charging merchants) and a fee to the cardholder ($5 a month).

They could have done both and made more money. Why didn't they?

[Admiral Yi]

Okay, let's presume that banks want to make as much money as they can. You'd agree with that, right?

Why were they not charging a fee prior to Dodd Fank for each transactions (charging merchants) and a fee to the cardholder ($5 a month).

They could have done both and made more money. Why didn't they?

For the same reason they weren't charging a trillion dollar fee for each debit.  Price elasticity. 

And competition.

[Faeelin]

For the same reason they weren't charging a trillion dollar fee for each debit.  Price elasticity.

So, this is actually a terrible idea on Bank of America's part, and people will switch to the banks which aren't adopting this $5 a month fee?