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Intro: "Bank of America, the nation's biggest bank, said on Thursday that it planned to start charging customers a $5 monthly fee when they used their debit cards for purchases. It was just one of several new charges expected to hit consumers as new regulations crimp banks' profits."

A customer uses a Bank of America ATM in Charlotte, N.C. (photo: Chuck Burton/ AP)
A customer uses a Bank of America ATM in Charlotte, N.C. (photo: Chuck Burton/ AP)

Banks to Make Customers Pay Fee for Using Debit Cards

By Tara Siegel Bernard and Ben Protess, The New York Times

30 September 11


ank of America, the nation's biggest bank, said on Thursday that it planned to start charging customers a $5 monthly fee when they used their debit cards for purchases. It was just one of several new charges expected to hit consumers as new regulations crimp banks' profits.

Wells Fargo and Chase are testing $3 monthly debit card fees. Regions Financial, based in Birmingham, Ala., plans to start charging a $4 fee next month, while SunTrust, another regional powerhouse, is charging a $5 fee.

The round of new charges stems from a rule, which takes effect on Saturday, that limits the fees that banks can levy on merchants every time a consumer uses a debit card to make a purchase. The rule, known as the Durbin amendment, after its sponsor Senator Richard J. Durbin, is a crucial part of the Dodd-Frank financial overhaul law.

Until now, the fees have been 44 cents a transaction, on average. The Federal Reserve in June agreed to cut the fees to a maximum of about 24 cents. While the fee amounts to pennies per swipe, it rapidly adds up across millions of transactions. The new limit is expected to cost the banks about $6.6 billion in revenue a year, beginning in 2012, according to Javelin Strategy and Research. That comes on top of another loss, of $5.6 billion, from new rules restricting overdraft fees, which went into effect in July 2010.

And even though retailer groups had argued that lower fees were important to keep prices in check, consumers were not likely to see substantial savings. In fact, they are simply going to end up paying from a different pot of money.

Or as Jamie Dimon, chief executive of JPMorgan Chase, put it after passage last year of the Dodd-Frank Act, "If you're a restaurant and you can't charge for the soda, you're going to charge more for the burger."

Chase is now charging customers for a paper statement. It also, like many other banks, scrapped its debit card rewards program. And customers that Chase inherited from Washington Mutual no longer enjoy free checking accounts.

The bank is also exploring a number of other fee increases, including for online banking, according to people with knowledge of the matter.

Bank of America's debit fee is steeper than most of its competitors', reflecting the broader challenges the bank is facing after the financial crisis. The bank has introduced an online-only account that charges customers for doing business at a local branch. It also plans to apply its new debit card fees to anyone who uses the card to make recurring payments like gym fees or cable bills.

Citibank is one of the few that said it would not introduce a charge for debit card use. "We have talked to customers and they have made it abundantly clear that ‘if you charge me to use my debit card, I would find that very irritating,' " said Stephen Troutner, head of Citi's banking products. Still, the bank has made it more difficult to qualify for free checking, among other moves.

Earlier this year, Wells Fargo estimated that the Durbin rules would cost the bank $250 million in revenue every quarter. It hopes to make up half that gap with a variety of new products and customer fees, including the monthly debit card fee of $3. The change is part of a "pilot program" the bank will begin on Oct. 14 in five states across the country, including Washington and Georgia. As of Saturday, the bank will discontinue its debit card rewards program.

Meanwhile, HSBC said that it recently increased an A.T.M. fee - to $2.50 from $2 - for certain customers when they used a competitor's A.T.M. It also recently introduced a debit transaction fee of 35 cents, though the first eight transactions are free.

And at TDBank, customers will now have to pay $2 for using A.T.M.'s outside their network.

"Durbin essentially moves the cost of debit away from merchants, and now it's more focused on consumers," said Beth Robertson, director of payments research at Javelin. "There are all sort of things happening where banks are saying, where can we put fees in place for our service to generate revenue or how can we reduce our costs?"

Over the last few years, consumers have increasingly shifted their spending to debit cards from credit cards, in large part to curb their spending. But some analysts predicted that the new fees could prompt consumers to return to credit cards - a more lucrative alternative for the banks.

Consumers have already begun to react to the changes.

Patrick Shields, 48, said he had decided to leave Citibank, where he has held a small-business account for his residential window cleaning business since 1986. He was contemplating opening a personal checking account, but realized he could do better at a credit union.

"At the credit union, they opened it free of charges, which Citi could not and would not do," said Mr. Shields, who noted that a personal checking account would have cost more than the one he uses for his New York business. "Now I have both accounts covered, and I am fee-free."

The so-called Durbin rule quickly emerged as one of the thorniest provisions of Dodd-Frank, touching off a long and furious fight in Washington. Wall Street dispatched an army of lobbyists to tame the rule, ultimately yielding mixed results.

In June, the Senate defeated a measure that would have delayed the new rule. But just three weeks later, the Federal Reserve decided to cap the fees at 21 to 24 cents for each debit card transaction, a much lighter blow than once expected.

In a statement on Thursday, Senator Durbin, Democrat of Illinois, said that small businesses would benefit from the new limits. "Swipe fee regulation will still allow banks to cover the actual costs of debit transactions but will rein in the banks' excessive profit-taking." your social media marketing partner


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+29 # MainStreetMentor 2011-09-30 16:03
If anyone is STILL utilizing banking services from banks, I'd like to understand why! If you want to REALLY make banks pay for what they've done to our economy - move every financial need you may have to ANY credit union of your choice. Money is the ONLY thing banks understand - and when they start feeling the "pinch" like you, I and the rest of middle class Americans have - they'll start reeling in these greedy charges/fees.
+10 # Virginia 2011-10-01 02:20
Credit unions - no banks! How stupid are they? With all their patented personal behavior "apps" they'll just drive people to using cash... and they won't be able to follow spending habits as well. Next thing you know, you'll lose credit score points for not having a debit card. Remember when you were advised to have 5 active credit cards to keep you credit score up? Yeah, don't give any bank the pleasure of your money. Make deposits to credit unions and don't keep anymore cash in the account than you need to to pay bills.
+26 # Kayjay 2011-09-30 18:05
So the fed nearly halved what BoA can charge retailers per transaction.... oh boooohooohoooo. Just think of the tsunami of tears those fascist BoA bankers would leak, if say, 1/3 of their customers moved their accounts to credit unions! Hopefully many branches would close, and we could use these empty spaces as job retraining centers. Well, we can hope anyway. But more of us can make the switch to a credit union.
+7 # JoanWile2 2011-09-30 22:17

from Joan Wile's Daily Doggerel on Twitter and Facebook
+22 # DaveM 2011-09-30 22:29
The moment I get a statement from my bank charging me a fee for a basic service (hey, does anyone remember the phrase: "Your Full Service Bank"), my money will go to a local credit union. Sounds more and more as if banks are trying to act like airlines.

It seems to me that just a few years ago, billions and billions of tax dollars was spent to "bail out" banks that were unable to balance their own checkbooks well enough to keep themselves solvent. Well...that was OUR money. If anything, THEY owe US.
+8 # sandyboy 2011-10-01 02:09
Pay fees to spend your own money that you already put into your debit card account and that's sitting in the bank coffers! Only these villains could actually think that a fair proposition. Strike that - they know it's NOT fair, they just don't care.
+7 # BradFromSalem 2011-10-01 07:41
I am very confused. I must be very stupid. I probably was asleep in school during math class.

This is what I thought happened under normal circumstances:

I have some money, I give it to a bank to hold for me. In return for letting them have my money I can ask the bank to send my money to someone else for stuff that I buy. While they have my money they can use it to buy a share of a company. If their investment loses money, they still owe me my money. If the investment makes money they make a profit, and still owe me my money.

The my money part is untouched by their wins and losses in the investment arena. The bank discovers that it easier and cheaper for them and me to make my payments electronically instead of on slips of paper.

Here is where I get really confused. Somehow a procedure that used hundreds of people reading little slips of paper to one that uses a handful of persons to make sure that transactions process correctly requires an additional charge, but if I go back to the little slips of paper, its free?

I think they want me to pay for their bad decisions on how to invest my money!

But I must be wrong because I was asleep in math class.
+5 # walt 2011-10-01 08:03
People should pull their money out of these big banks and join member-owned credit unions!
I cannot fathom for a second how these arrogant banks with such records of shame can continue to behave with such antagonism toward people. Add to that the fact that BOA paid zero federal taxes last year. They deserve to collapse, but President Obamabush, a Wall Streeter at heart, would probably save them in the 11th hour!
-22 # Abigail 2011-10-01 08:23
Let's understand this. The person who uses a debit card is, in fact, borrowing money from the bank. Normally, when you borrows money from a bank, you expect to pay interest on it. What is the fuss about? you borrow, you pay interest. If you intend to pay off the loan at the end of the month, you should use a credit card. You are generally granted 15 days free to pay the money back. If you can't afford to pay the money back in a month, you shouldn't be buying in the first place.
+9 # BradFromSalem 2011-10-01 09:01

Do not confuse a debit card with a credit card. A debit card is an electronic check. The money is drawn directly from your account, the amount available is verified against your account. It is not a loan.
+5 # fredboy 2011-10-01 08:46
Wish we could charge banks for holding (and using) our money.
Since the Fed's interest rate deterioration, we who save are for the most part screwed.
+7 # fredboy 2011-10-01 08:48
Abigail, when I use my debit card the receipt says the funds were immediately withdrawn from my checking account. I was "sold" on the process by the bank--they told me it cost them far less than processing a check. So I am not "borrowing" anything.
+8 # erogers 2011-10-01 11:12
Lets be clear on one point. A debit card is NOT a credit card, the money comes from your checking account. If you have money in your account to cover the debit card purchase you are now charged $5. to access your Own money which the bank is earning interest off while giving you next to nothing for putting your money in that bank and now charging you $5 every time you try to use your own money. Greed on top of greed. Dump the credit cards, dump the debit cards and go back to using CASH. See how long it takes banks to decide they "appreciate your business". Just one more burden on an already crushed middle class. Just say no to the experience.
+5 # Regina 2011-10-01 12:03
This new noose around depositors' necks is cause for outrage. I for one will NEVER use the debit card my bank sent me, unsolicited. As it is, they charge me $3 a month for sending me a copy of my account's statements. But their reps greet me cordially because of my direct deposits -- they're wallowing in the float between those deposits on the 1st and my bill payments that clear later. The only way to fight off these monsters is by moving your money -- your OWN money! -- to a credit union, including those juicy direct deposits.
+2 # BLBreck 2011-10-02 16:15
Tell the banks to go screw themselves for a change! Pull all your accounts and use a Credit Union!

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