End Of Free Debit Card Purchasing?

-Submitted by David Drumm (Nal), Guest Blogger

Bank of America is leading banks all across the country in instituting new monthly fees for customers who use debit cards. BoA will start charging customers $5 a month while Wells Fargo and Chase are testing a $3 a month fee, Regions a $4 a month fee, and SunTrust a $5 fee.

These fees are a reaction to a rule, the Durbin amendment, that takes effect on Saturday that limits the fees that banks can levy on merchants when a customer uses a debit card to make a purchase. The previous fee of 44 cents per swipe will be cut to a maximum of 24 cents. This is on top of the new rules restricting overdraft fees, which went into effect in July. It was estimated that banks would lose $6.6 billion and $5.6 billion on the new rules.

Merchants are prohibited from adding swipe fees to the customer’s bill, keeping the cost of swiping hidden from the customer. The merchants just up their prices so all their customers subsidize the cost of card transactions.

Overdraft fees were also hidden. They were unpredictable, unseen, and effected primarily low-income users. Overdraft fee calculations were based on a per day usage and often designed so that a particular overdraft would trigger the maximum number of overdraft fees for that day.

Debit card purchasing was never free, it’s just the fees are now out in the open. Debit card users will be subsidized less by low-income overdraft fees and price hikes by merchants. The cost of using a debit card is now up-front and bank customers will be able to make informed choices.

H/T: Kevin Drum, NYT, CSM.

24 thoughts on “End Of Free Debit Card Purchasing?

  1. I wonder if the debit cars issued by the government such as Bridge Cards will be exempt….if so…why not?

    I suppose this will cause more checks to be written…thus giving banks float…..(longer use of money before the checks are negotiated)

    This is going to hit me as I have not written a check in about 5 years….I have relied exclusively on debit/check cards…..

    Thanks nal….

  2. I like the new plan, especially the fact that merchants can no longer have a swipe fee. There is one local service station chain added a $1.00 fee onto all debit card transactions at the pump, but did not have a warning or option for the customer to decline.

    As for banking, I use a locally owned but very stable bank. It has several branches in nearby cities and towns, but the bank headquarters is only a couple of miles from my house. I run into the bank President/CEO at the local coffee shop or one can get an appointment with him in his office.

    My other account is in a locally operated credit union.

    Nice thing about doing business this way is that your account is safer and easier to manage not being in a mega-bank.

  3. :=)))

    “Yesterday is a cancelled check. Today is cash on the line. Tomorrow is a promissory note.
    Hank Stram ”

    “Today you can go to a gas station and find the cash register open and the toilets locked. They must think toilet paper is worth more than money.
    Joey Bishop “

  4. The rest of the world is increasingly using plastic (debit cards) rather than cash. Other countries also have upgraded their credit card technology. Yet, here the philosophy seems to be one that parallels the religious right assault on science: no new technology (credit card processing) and erecting barriers to the use of commonplace technology (debit cards). The major banks have grown accustomed to making profit from service charges and, like other US industries, from delaying implementation of new equipment and technology.their incompetence in other areas of business delivered us a major recession, and they can’t seem to figure out how to run a profitable business that the public actually wants to use.

  5. This is slightly OT, but then again, maybe not. Rich’s comment above started me to thinking about technology and ATM equipment.

    Both my bank, my credit union and all the other local banks use ATMs made by Diebold. I have never made a transaction on a Diebold ATM anywhere that I did not get a receipt. Some will also give you your remaining balance, credit available and other important information. My local bank branch manager tells me there is also an internal paper receipt strip in the ATM for audit purposes just in case there is an electronic glitch and data are lost.

    How is it then, that Diebold is functionally incapable of making a voting machine that also does not keep a paper record?

    Never mine answering that. It is a rhetorical question and I already know the answer. It is not a good answer, but the true answer and it makes me ill.

  6. OS,

    From an accounting standpoint….and I do mean accounting….It is much easier to plug an audit….if you know what you are looking for and want to achieve…I think that this answers your questions….

    Now, all the folks have to be on the same page…

  7. strangely, I have no problem paying $5/month to my bank for the ease of using my debit/credit card all over town. If my purse gets snatched they don’t get my cash and if they manage to use that card…I am not held liable. I do not mind paying my fair share….

  8. Woosty,

    Not so…..

    ATM and Debit Cards

    With ATM or debit cards, you must act quickly in order to avoid full liability for unauthorized charges when your card is lost or stolen. Under the federal Electronic Fund Transfer Act, your liability is:

    $0 if you report the loss or theft of the card immediately and the card has not been used up to $50 if you notify the bank within two business days after you realize the card is missingup to $500 if you fail to notify the bank within two business days after you realize the card is missing, but do notify the bank within 60 days after your bank statement is mailed to you listing the unauthorized withdrawals, orunlimited if you fail to notify the bank within 60 days after your bank statement is mailed to you listing the unauthorized withdrawals.

    http://www.nolo.com/legal-encyclopedia/unauthorized-credit-debit-card-charges-29654.html

    Then you have the hassle of the investigatory period….which can take months….Then….you prove that the card used was not you….if you do not file a police report…they can and will hit you with the fees….I know… it has happened personally to me….

  9. Woosty…Anonymously Yours laid out the case and for a long time, debit cards were not covered, so you had to hope that the bank wasn’t going to screw you.

    The idea that you’re willing to pay someone so that you can use your money is simply absurd to me. Banks historically operated on the premise of giving you something in return for tying up your money. Letting them get away with this nonsense just encourages them to encumber your funds even more and put the burden on people of modest means. In India, the banks hire agents to enable people to open small electronic savings accounts to accumulate capital. Here we seem to do the opposite.

  10. I think we all know that the coporate structure is going to get their money one wway or another. If the government makes swipe fees illegal, the corps will start charing you for the in it takes to print the receipt.

    They are vicious in their greed. Not the same senario but it goes toward showing their blatant tactics.

    About few years back, our local power company Baltimore Gas and Electric wanted to merge with Constelation Energy.
    Constelation Energy however would not merge unless we disbanded the Martland Public Service Commission which controled utility rates

    Some how?????? Our Governor was able to do this. I think we got a bump on the head and when we awoke……….That’s what I recall at least

    The customers were told that this would cause a 75% increase in their electric rates.

    The then Governor, Bob Ehrlich, (a gentleman of the Republican persuasion) stood up and swore that he would take personal charge of the situation and get us a better deal.

    The rates went up 75%. The better deal was that we could pay less to start but that money that we didn’t pay today was spread out over the next ?# months and at some point it left you paying 75% more than you started.I can’t recall the details but here’s the kicker. These guys understand the psychology of the people so well; that people adjusted quickly and were just happy not to be paying of the extra from the first few months.

    Constelation said the increase was necessary to offset the cost of blah, blah, blah and because we had been paying artificially low rates for so long BG&E wasn’t in very good shape and they were going to have to absorb blah, blah, blah.

    So there we were and it was absolutely amazing to see how many prople bought in to this crap.

    But when Constelation painted such a gloomy picture and our own Governor signed off on it as the very best he could do, what were they to think; these sheep. These poor lambs.

    When the reports came out for that year, The news man on the radio said, “Constelation energy is reporting record profits for the fiscal year ????”.

    75%. I know many families that have never been able to keep up and some who have lost their service repeatedly or permanently because of this.

  11. […] Bank of America. Their latest scheme to extract money from their customers comes in the form of a $5 monthly fee for debit card use. I’m hoping the $5 monthly fee can be sufficient […]

  12. Why would anybody keep their money with a bank if they have an alternative? My credit union reimburses me for the ATM fees charged by for-profit banks. It’s nice not having to pay investors or finance the ancien régime lifestyles of bank executives.

  13. I stand corrected.

    Plus, I just read an article that said hat the bank waives the fees for the big buccaroo accounts.

    I wouldn’t mind paying my FAIR share. I’m not blind to costs and such but you are right, it is hardly equitable and its very sad to get my eyes opened so mercilessly.

    it’s like playing monopoly with cheaters….the game is just not fun when you learn who you are playing with and they are just dull thieves….

  14. SunTrust is now also charging $7 for a checking account, which was previously free. Just goes to show no matter what laws are made, they’ll make their ridiculous profits somewhere else. This is why I only use credit unions.

  15. pretty soon they are going to go after the credit unions. since the banks dont really make to much of a profit off of them and of course someone has to pay for the lavish lifestyles of the rich and shameless

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