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News, Politics, Social

Bank of America’s Debit Card Fee: Business as Usual, or the Last Straw?

Starting in 2012, Bank of America customers will be a charged a monthly flat-rate of $5 to use their debt cards, regardless of whether they have made one purchase in a given month or dozens, or if they used “debit” or “credit”. Customers will not be charged if they do not use their debit card, and the new charge will not be implemented on withdrawing funds from an ATM or from certain premium accounts.

As soon as that news story on the afternoon of Thursday, Sept. 29 broke, outrage caught on like wildfire across social networking sites like Twitter and Facebook from customers, many tweeting that they will be looking to switch banks (which is an arduous process). Bank of America, however, is the first major financial institution to go ahead and implement this policy. JP Morgan Chase has tested a $3 monthly fee on customers with debit cards in northern Wisconsin, while Wells Fargo has announced a similar $3 monthly fee in Georgia, New Mexico, Nevada, Oregon, and Washington State starting October 14.

Why is this happening?  Starting October 1st, new rules from the Federal Reserve go into effect that caps the fee on what banks can charge retailers every time a customer swipes a debit card.  The average amount financial institutions charged was 44 cents per card, and the cap now places banks at the maximum charge of 21 cents. This cap is expected to lead banks to lose billions of dollars. (Read more about the BofA’s new fee here, courtesy of CNNMoney)

When I first posted the story, I engaged in a lively discussion with a friend of mine who works for Bank of America, and he will remain nameless. He defended his company’s bold and controversial move with valid and well-considered points, noting that the BofA, no matter how large, is still a business that has to pay salaries, security, rent on buildings, and for their services.  He added that, to stay alive in this rough economy, business are forced to make unpopular decisions and that, because of capitalism, the US Government is not authorized to pay any bills the BofA has to pay.

This is where we started to disagree.  He commented that the public would not have complained if ATM cards had fees already.  While this is true, I guarantee there would have been a similar outrage in any decade. When I suggested that bank executives should take a pay cut, he scoffed the idea and suggested no one would do that.  Some executives have been known to take a modest pay cut, as well as asking to pay their fair share of higher taxes during this recession. (Read more about Warren Buffett’s movement to raise taxes on the rich here, courtesy of the Huffington Post)

But the one thing I disagreed the most on was one of his statement:

“[…] I think people have to realize that they took advantage of the good old days and now that it’s a tough economic time, we have no choice but to adapt to change.”

I’m not going to delve into economic social darwinism or how the US should continue its shift toward a Social Democracy where essential goods and services are controlled by the government while all other non-essentials should be privately owned. It’s too large a topic.  But what struck me about my friend’s statement was that his statement represented the callous nature of financial institutions. I reiterate, I do not believe my friend is callous, but that his words represented a problem with this country.

Since September 17th, protesters – who made national headlines in Union Square after police were accused of handling the crowd roughly – have taken a stronghold in Zuccotti Park, blocks from the World Trade Center site and the Financial District. They are called Occupy Wall Street, and they have vowed to stay in the park throughout the winter season (they already have seen support from several unions prepared to assist them with food and other necessities during the season) to protest numerous financial causes ranging from the 2008 bank bailouts to the high unemployment and division between rich and poor. (Read about their recent march on One Police Plaza in protest of their handling of the Union Square incident here.)

Maybe what I’m writing are conspiracy theories, but they are not outside the realm of impossibilities.  The first thing I expect is that once Bank of America implements its fee, other banks will soon follow.  Within the next few years, you will be charged to use your hard-earned money. To use a political phrase, I would consider this a flat tax; and it’s not even going to the government, but to private corporate institutions. And there is not much that one can do about it, because I don’t expect people to store their life savings under the bed or in a personal safe.  Americans will just have to endure a bank charging you to use your own money, as my friend said.

Next, inflation.  In 1994, the New York City Transit System fare rose from $1.25 to $1.50.  Today, it stands at $2.25 – $2.50, and is expected to rise again. With this in mind, if Chase and Wells Fargo are at $3, who is to say they will not raise their rates to match Bank of America’s at $5?  Who is to say then that financial institutions will not charge more for this service?  Maybe $7. Or $12 to use a debit card.  It won’t happen immediately, but it’s possible. And because this is unchecked by the government, it can really go as high as possible. Of course I’m being dramatic with $12 to use a debit card, but modest incremental rises are possible.

Withdrawing money out of the ATM will not charge you $5, so perhaps more people will decide to carry around more than usual paper money. My friend mentioned in his argument that people would not carry $100 – $400 in their wallet, but I disagree. People might be more encouraged to do this to avoid using a debit card. This knowledge, however, could possibly raise petty crime rates.  I predict that robberies could be more prevalent because down on their luck people could rob someone who has just pulled a lot of paper money out of the bank to avoid this surcharge. The other alternative Americans have is to use credit cards, and as more people use credit cards, credit card debt will rise once again.

So why should we sit and take this? I agree with the Occupy Wall Street’s theme, however, they don’t seem to have a centralized goal.  This should be their first organized move.  My friend’s position was to defend the bank as a business entity.  I respect that wholeheartedly, but I kindly disagree and put forth my position: to protect the customer.  The customer is every ordinary American in this country, a country in a deep financial recession that has left millions in poverty.  Prices go up on everything: from transportation to food.  But wages haven’t rose.  Jobs haven’t increased.  And now people who rely on their debit cards now have to pay yet another fee.  How much more digging into our pockets can we handle, America? How much more before we finally say enough is enough?  My friend believes that people will just take it and move on, chalking it up to the good old days.  I say we should not and I hope that Bank of America customers continue to protest this move.  I also hope that all other Americans with a debit account persuade their banks to avoid doing this.



About Richard L. Vargas

Among many things, I'm a writer, blogger, news junkie, and pop culture enthusiast from New York City.


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