Excerpt
JEFFREY BROWN (Newshour): Big banks and the question of their profits have been the source of plenty of public anger since the beginning of the financial crisis. Now new fees for consumers are putting them in the spotlight again.
Swiping a debit card is about to get more expensive for tens of millions of Americans. The biggest bank in the country, Bank of America, says it will tack on a new fee, $5 a month, when customers use a debit card to make purchases.
The reaction was immediate.
WOMAN: I can use the ATM without having to pay fees, but now, if they're going to start charging me fees, it kind of defeats the purpose of why I signed up with them in the first place.
JEFFREY BROWN: In a phone interview, Bank of America Spokeswoman Anne Pace called the move a sign of the times.
ANNE PACE, Bank of America spokeswoman: Clearly, the economics of offering a debit card have changed with the recent regulations. As a result, we have decided to introduce monthly usage fees.
JEFFREY BROWN: Bank of America won't charge customers using one of its 20,000 ATMs.
The announcement comes after legislation was passed last year to regulate the financial industry. One provision directed the Federal Reserve to cap so-called swipe fees that banks could charge merchants when customers use debit cards. The Fed set that cap at 21 cents per transaction, which will go into effect tomorrow. That's a big cut from the previous average of 44 cents per transaction, fees that yielded $19 billion for banks in 2009.
Bank of America is the biggest bank so far to add a monthly fee, but it won't be the last, as giants Wells Fargo and J.P. Morgan Chase are now testing $3 debit card fees.
And we debate the new fees now with David Lazarus, consumer and business columnist for The Los Angeles Times, and Richard Hunt, president of the Consumer Bankers Association, a trade group representing the country's leading retail banks.
We invited a representative from Bank of America, but they declined.
David Lazarus, I will start with you. You wrote in your column today, Bank of America isn't just having its cake and eating it, too; it's serving itself another piece.
So why do you think this new fee is wrong?
DAVID LAZARUS, The Los Angeles Times: Well, it's not so much that it's wrong. I don't think anyone begrudges the banks charging a fair profit for a fair service.
And they are offering a lot of convenience. They are offering fraud protection. They are offering overdraft protection. The question here is, how much does it really cost the banks to process a debit card transaction and how much do these ancillary services cost?
Well, here is an example. The Federal Reserve says that it pretty much costs about 4 cents to process a debit card transaction, considering the huge economies of scale, 4 cents. So that means the current average of 44 cents represents a 1,000 percent profit.
So now that we know that, as of tomorrow, that's going to be cut in roughly half to 21 cents, well, that's still a 500 percent profit. If you can't make money off a 500 percent profit margin, you are in the wrong line of work.
"Current average of 44 cents represents a 1,000 percent profit." and that's NOT enough!... AND we bailed these banks out! Now a 500% profit is still not enough?
Big-bank$ have never really cared about their every-day customers. They are all about greed. If they could charge you by the minute for breathing the air when you're inside their banks, they would.
Suggestion to everyone, join a Credit Union.
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