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One of the really striking differences between daily life in the US and Canada is the all-pervasiveness of debit cards north of the 49th parallel and their comparative absence to the south.
On the US side, banks until recently charged retailers a very hefty price for the use of a debit card, averaging 44 cents a transaction. This summer, the Federal Reserve imposed new limits on debit card charges, driving fees down to an average of 24 cents.
This week, Bank of America responded by imposing a new monthly charge to use a debit card at all.
Bank of America attributes the new monthly charge to genuine cost issues. Maybe. But it’s always worth remembering that banks detest debit cards on principle, and for exactly the reason that consumers like them. Debit cards prevent consumers from accumulating excess debt. They compete with credit cards, which encourage debt. And despite today’s ultra-low-interest rate environment, credit card interest rates have reached an all-time peak of an average almost 15% APR.
So yes it’s theoretically possible that banks are on-forwarding genuine cost increases. But it’s also possible that banks do their accounting in such a way as to make the strongest possible case against the debit cards they hate, so as to drive consumers back toward the dangerous device that makes them so much money: credit.
Happily, there are other banks in the world than Bank of America. (I’m a customer, but I’ll be rethinking.)
Whatever your personal financial decisions, one lesson should be taken by all from the financial crisis of 2008-2009: more skepticism is due about everything the big US banks say about what they do and why they do it.
Rossg // Oct 2, 2011 at 9:29 am
Many years ago, credit card issuers tried to charge annual fees on what were then ‘plain-jane’ cards. It didn’t work out so well; at least now, if you pay an annual fee, you are probably earning ‘rewards’ to be used later.
Debit cards are, of course, different from credit cards, risk limits being one of the differences.
Still, if people love their debit cards as much as some on this post, then we will all learn to eat the fee and be happy. Some big banks have chosen to impose them; many others might follow, at which point fees will become accepted. This is a move to test what the market will bear.