If I was a bank,I’d charge people $5/mo to make debit card transactions too–after the govt capped my transaction limit & thus my profits.

A lot of people are whining about paying $5 to use their debit card. Nobody’s making you use that debit card. You don’t have a constitutional right to withdraw money from a bank account using a debit card. It was a banking gimmick to make money off people too irresponsible to have credit cards, and people too cowardly to carry large amounts of cash. It worked. A lot of people who are scared of buying cash and have no credit now use debit cards. (Nevermind that this means all their transactions are now data points for Big Brother.)

I also just read a study… It’s about 5 yrs old, but was the first of its kind. Only half of people even use ATM cards for direct-draw purchases! I think I only have once, when it was a $50 discount (at which point I wouldn’t mind paying a $5 fee to save $50!). The other half of people pay using credit, check, or cash. No ATM swipes.

The half of people that DO purchase using direct-draw ATM/check cards do this do it an average of 3 times a week, or 12 times a month. The government just passed a new regulation capping the transfer fee at 21 cent cap. I thought credit cards charged 29 cents per transaction? 21 cents seems kinda low! Actually, upon cursory inspection, they charge about 2% of the sale. That’s a lot. The costs add up. I know they do, because I’ve gone to places that only take cash because they don’t want to pay for all the credit card transaction fees. Gas stations often give you a cheaper per-gallon rate if you pay in cash. Cash is king.

Anyway, at the average rate of 12 transactions a month, a bank stands to only make $2.52. A credit card company would make a lot more than this. Say your $12 transactions were $25 each; that’s $300, or $6 in fees at 2 percent. PLUS they make interest off balances (if you’re the type who doesn’t pay your full balance each and every month). They make a lot of money doing these transactions! But Bank Of America would only make $2.52 on these transactions.

 

Now take into consideration that the relationship between banker and customer is the opposite of the relationship between between creditor and customer. The bank pays you for holding your money; you pay creditors interest for spending your money before you get it. Transactions are less profitable for banks than for creditors.¬†Credit card companies make big money on those irresponsible (or, in rarer instances, unlucky) enough to end up paying interest. I’ve never paid interest on my credit cards; I’ve never carried a balance except by billing error; and in fact they’ve written me a $250 check for having spent $25,000 through my main card. In other words, everything I buy via credit is 1% cheaper than the cash rate (assuming both are sold at the same rate, and it’s not one of these places that gives you a cash discount).

But for banks, it’s the opposite. Banks keep our money and pay US interest, instead of us paying them interest. A transaction at an equal cost to both businesses is a completely different animal. For a creditor, $6 in transaction fees opens them up to making business on you paying the interest on what you just bought. For a bank, $2.52 in transaction fees means they make no extra money. (They may save a miniscule amount of interest, but there’s no profit.)

ATM cards don’t really open banks up to new business. It only drains money from them. It doesn’t matter if they are net-profit — a way a business stays profitable is by eliminating arms of the business that are not profitable.

It is fully possible for anybody, rich or poor, to make as many purchases they want without spending a cent on transaction fees. Just don’t expect the banks to foot the bill forever. It was a temporarily thing based around a gimmick to gain customers. But the gimmick is no longer special. The honeymoon is over. Back to normal.

If you want this fee to end, then you are foisting the costs of YOUR debit card onto people like me who don’t use them. The money that the banks lose on these transaction fees (and associated fraud) will be made up for by increasing other bank fees. Fees that apply to all people. They are a business. To succeed, they will make sure to operate at a profit. That is how business works. If you take away money from one area of income, they will raise prices in another area to make up for it. So now their fees have gone up. Or maybe they now offer a slightly lower interest rate. So now I’m paying for your debit card?

Yeah, I’d much rather you pay for your debit card than me. It’s not my fault you got sucked into sucking your bank’s teet for every penny you spend. There are tons of creditors willing to let you spend their money instead, in the hope that you won’t pay it back at the end of the month. They are much nicer with their money than the banks!

I recently read the average american loses over $100 a year in their checking account due to bank fees. That’s funny — I’ve banked for over 18 years, and that is more than the total fees in my life. I did get a few for going below the minimum balance. But you know what? If you spend 20 minutes to phone in a complaint, most banks will waive a fee just to get you off the phone. They’re counting on the stupid people who fuck up, incur fees because they can’t work a system, and then don’t fight it. The cause is not their evil fee structure (which you want to increase, by making me have to pay for your debit card transaction fees), but people who don’t know how to operate within a system.

If you overdraft, you are spending money you don’t have. You should be using a credit card. If you hit minimum balance fees, you don’t have enough money for a bank account. You should be using cash. If you have bad credit — you get what you deserve. And remember: No credit is as bad as bad credit. If you don’t have a credit card — even one you never use — you’re setting yourself up for failure later in life.

If more banks pick up this fee, expect more people to use credit or cash. Someone tried to claim that cash was somehow more expensive than electronic transfers. Has anyone ever made you pay them 29 cents to give them cash? Nope. Cash costs the cost of the minimum wage worker who takes it from your hand and puts it in the register. He’s already paid. His slowdown only really affects the people in line behind you. No extra money is spent to collect the cash past the cashier who is there for all forms of payment. Electronic? Now you need network connectivity, machines to process the cards, electricity; the credit card companies need massive databases, database programmers, administrators, data centers, IT security. OF COURSE electronic fund transfers are more expensive! They will likely be more expensive than cash for the forseeable future. I am surprised this is not a fact that is simply instantaneously obvious to people without any evidence being prevented.

But anyway — this whole $5 ATM card thing is a great example of entitlement-based bellyaching. As a customer, if you don’t like it, you can take your money elsewhere. (For now.) And you should. Go to a credit union. Go somewhere else. Don’t use Bank Of America if you don’t like their fee structures. IT’S YOUR MONEY. YOU control how it exists in the system. If you have to pay $5 to do things the way you want to do them, and that is unacceptable to you — then YOU need to change.

Anyway, the government regulated business, and business passed on the extra cost incurred to the customer. This is pretty much how any business would operate. If you made me sell t-shirts at a loss, I’d make my customers pay a t-shirt club fee to get into my store. I’d have to make up that money somehow. While the dollar values might not be accurate (perhaps credit card transaction fees are too much, so the comparison may not be as good as I think it is), the point that they are charging people who use a service for using that service — rather than making up that money elsewhere — is quite fair to me.

I shouldn’t have to pay for your inability to use cash or credit.

Mood: annoyed
Music: Voltaire – Blue-Eyed Matador