Charging for Debit Cards Is Robbery

[Donnachaidh]

http://www.nytimes.com/2011/10/07/opinion/debit-card-fees-are-robbery.html?_r=1

WHEN Bank of America told its customers recently that it would start charging them $5 a month to use debit cards, it argued that it was forced to make that change because of regulations that altered the economics of the cards. Other banks agreed. The chief executive of JPMorgan Chase, Jamie Dimon, put the effects of the regulations this way: “If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger.” Both banks were responding to the Federal Reserve’s actions to limit the interchange fees banks charge stores each time a debit card is used for a purchase.

But the banks’ simplistic statements are merely an attempt to rationalize and obfuscate one of the largest illegal transfers of wealth from consumers to banks in American history.

Debit cards were developed by banks as a replacement for paper checks. When a consumer pays with a debit card instead of a check, the bank saves money. In the 1980s, Visa calculated the savings at 55 cents to $1.60 per check. The savings is much higher today. For decades, Bank of America, the founding owner and member of Visa (originally called BankAmericard) and all of the Visa and MasterCard banks, including Chase, hid the identity of their debit cards from stores by designing them to look and function like their signature authorized credit cards and by charging stores the same price for debit and credit transactions. Banks did this despite the fact that purchases made with a debit card didn’t involve a loan from the bank, posed very little fraud risk and were extravagantly profitable to banks because they eliminated the costs of processing and clearing checks.

The practice of deceiving stores and forcing them to accept overpriced debit transactions was challenged in a 1996 antitrust lawsuit against Visa and MasterCard, in which I was the lead attorney for the plaintiffs. In 2003, that resulted in a $3.4 billion settlement to stores, a court order to redesign the debit cards and a reduction in the price banks charge stores for common debit transactions — to an average of 42 cents per transaction from an average of 63 cents.

More at the link --

[MissMillie]

1. I say we inundate the banks w/ paper checks

I mean, if we're going to pay one way or the other, maybe the paper checks will actually force the banks to hire people again.

[Donnachaidh]

3. and hand them a vehicle to add to their fees and charges -- uhh no.

Banks can get real creative with checks and deposit dates and all sorts of fun things to add to thier bottom line.

Why hand them another potential income stream?

[qb]

2. I propose a movement back to cash transactions.

Let the banks handle tons of additional bills & coins. Then maybe they will be forced top stop pretending that electronic transactions are an enormous burden that requires additional fees.

[SoCalDem]

8. Debit cards are a godsend to small businesses

Bounced checks cost small businesses a bundle, and without cash on hand, they are safer too. Why rob a store that does not have much cash.

[qb]

12. The market near my house gives a discount for cash transactions. They get burned by fees.

[dkf]

4. Is there still very little fraud in debit cards?

Heck someone used my paypal account fraudulently and they've hardly made a dime off of me. I'm a net loss as a customer. My credit card also got hit and both times they were probably over $200 each.

If there were no recourse for fraud then I can understand not charging much of a fee.

[KansDem]

5. I don't understand Jamie's reasoning...

“If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger.”

What the hell does this mean? :shrug:

[CoffeeCat]

6. Jamie is talking about....

...the restrictions that governments put on the banks--through legislation. Legislation was passed that disallows banks to have
hidden credit-card fees that zap consumers.

He's pissed. The banks are pissed that they can't screw us over. So....they're making up for the lost revenue by charging
for debit card use.

This is why punk, ineffectual legislation like that is a sick joke. Please don't tell us that you're all about bank reform--and
ONLY pass limited regulation that prevents one kind of fee--when you know damn well that these banksters will just create
new fees to make up for the dent in their multi-billion-dollar quarterly profits.

Real reform is needed. Bring back Glass Steagall. Make mortgaged-backed securities with JUNK mortgages in them--illegal!
Make credit-default swaps ILLEGAL. Do something that is real reform!!

Jamie is basically saying....'Well, if we can't screw you one way, we'll screw you another way....and you'll accept it and like it!"

Sick, greedy thug!!

[KansDem]

9. His reasoning is convoluted...

I've always expected to pay for a soda at a restaurant. Why would he be expected to not charge for one now?

It's more like saying, "If I can't charge you for use of the rest rooms, then I'm going to have to charge you more for a burger." :wtf:

[AngryAmish]

15. In this case the government is saying you can't charge for soda anymore

[madinmaryland]

10. "Bring back Glass Steagall" That is what needs to happen. nt

[SoCalDem]

7. Debit cards were also a clever way to get rid of tellers

I remember them being marketed as a way to save time and to eliminate that dreary wait in line to cash a check at the bank.

Like anything new & free, that's marketed to us as a time-saver, eventually it quits being free.

[closeupready]

11. Open an accout with a credit union, then. Why do people bank with the Big Banks?

????

[ScreamingMeemie]

13. "Why do people bank with the Big Banks?"

I believe, for many, it was convenience. I live in TX. The majority of my family lives in Michigan, Wisconsin and California. A major bank offered (at the time) available ATM's, with no fee., while out of one's home state. Now? All bets are off.

[Romulox]

14. The government had no business telling banks what they could charge MERCHANTS

This is the law of unintended consequences at play--the Durbin regulation has moved fees from MERCHANTS and THEIR CUSTOMERS (where they belong) onto the bank customers who can least afford them.

YES, BOA is a villain here--but so is Durbin and his brand of crony capitalism.

[closeupready]

16. These guys are arguing implicitly that they are entitled to planned profits.

If the government regulates away part of where those profits are generated, then (they argue) they have "no choice" but to raise costs in other areas where they generate revenue.

Such ridiculousness.

[jmowreader]

17. Okay, let me get this straight

I have a savings account and a checking account at Wells Fargo. (No, I am NOT interested in changing to a credit union. I travel from Idaho to Washington frequently, to Oregon and Montana sometimes, and if I need to go into a bank branch to do some business while I'm in one of those other states, I really don't want to have to drive all the way back to North Idaho to do it!)

When my money is placed in their bank, the first thing they do is loan some of it out, at interest.

I'm charged $10 per month for the privilege of having my bank accounts.

So...rather than "paying more for the burger because they can't charge me for the soda," it looks like I'm paying for the burger through the money they make by investing my deposits, the soda through the $10 per month service charge and an order of fries because the interest rate on my savings account is less than a quarter-percent. If WF decides to follow BofA's example and start charging for use of debit cards, I'll ALSO be paying for a dessert I didn't necessarily want.