Editorial: Round and round over debit card fees

Tuesday, October 18, 2011
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Banks’ recent imposition of monthly debit card fees has been one of the issues cited by Occupy Wall Street protesters, but what did these people expect? After Congress imposed restrictions on the “swipe fees” that banks charge merchants every time one of their customers buys something with a debit card, the banks had to find some other way to maintain their profit margins.

The idea of getting something for nothing appeals to every consumer, and even if it sometimes seems to happen, in reality it rarely does. Consumers who were happily swiping their debit cards without having to pony up to banks were probably doing so to merchants without realizing it, since the banks were charging those merchants an average of 44 cents per transaction. They, in turn, were probably passing the hit along to their customers, just like they do their myriad other costs of doing business — rent, utilities, advertising, taxes, etc.

Now that Congress has limited the “swipe” fee to roughly 24 cents, the merchants are getting a small break. Whether they use it to become more aggressive with their pricing or simply use it to fatten their bottom lines remains to be seen. Not that consumers will be able to tell. Still, they might want to stop and think — maybe even thank their congressman — the next time they shop a sale that seems too good to be true.

What they shouldn’t do is badger their banks — at least not over this. They’re businesses, like any other, trying to make a profit. When a government regulation restricts their ability to do so in one way, they can’t be blamed for trying another. If Congress regulated debit card fees, banks would probably start charging credit card customers higher interest rates or giving their premium customers smaller “rewards.” Or they’d raise the minimum deposit for free checking. Any of these measures would enrage a different class of customer while boosting the banks’ bottom lines. But if J.P Morgan’s third-quarter results, released Thursday, are any indication, those haven’t been very robust lately.

The point is, the market — not the government — should decide what fees banks should charge. If enraged customers stopped using debit cards (as some say they will), the banks would either cut those fees or raise others — unless they calculated that they could do without as much debit card business. It should be up to them to decide how they want to run their businesses, and up to consumers to decide whether they want to patronize them. Debit cards, after all, aren’t the only way to shop.

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October 18, 2011
7:25 a.m.
steveg says...

It's awfully hard for me to feel much sympathy for banks when deregulation has led to such catastrophic effects both for the world financial system itself and the employment picture for a large part of the population here. Letting the market determine economic justice has been the mantra that accompanied deregulation and the fantastic polarization of wealth that has resulted. The editor may be right in particular cases, and a lot of regulation is illogical and counterproductive, but the principle is sound. Maybe I'm reading too much into the argument, but I'm wary of both banks and the implied rejection of government regulation as a principle.

October 18, 2011
10:34 a.m.
jerryrock says...

With Bank of America's decision to apply a five dollar fee for purchases made with debit cards, we need some kind of regulation. Electronic direct deposits and purchases have become the norm in our society. When the entire cost is passed on to the consumer, it adds to our economic disparity.

Recently, some utility companies began charging extra to pay with cash! When will the madness end?

These fees should be regulated to protect the consumer.

Gerald J Skrocki

October 18, 2011
11:49 a.m.
JLibertarian says...

Oh my gosh! I couldn't believe my eyes when I read your editorial today. This normally left-wing newspaper and editorial writer is actually making sense. And they got it right!

To steveg and Gerald Skrocki I wish you two would read things other than the Occupy Wall Street and communist propoganda. steveg, what is economic justice? There is no such thing! This country was founded on justice for all. That means everyone has an equal chance to make of their life by their own efforts what they will. I don't know why all of you people are so jealous and envious of those who have more than you.

The deregulation argument that the Democrats and leftists keep pushing is a bunch of bunk. And the Democrats are just as much to blame for all of this mess as anyone. In fact, they designed this to happen. Don't take my word for it, it was written in a book written by two NY Times reporters that was published this year. (I don't remember the name.)

Gerald, you don't get it. The fees are a result of regulations that limit the banks ability to make money and EMPLOY PEOPLE. If you don't like the fees, go to another bank. Every time government tries to "correct" one so-called injustice, another one occurs. That is called the law of unintended consequences.

Instead of whining that you don't have your fair share, why don't you try to do something about it for yourself. I urge you not to rely on government but rely on God.

John Gaetani

October 18, 2011
4:30 p.m.
robbump says...

Never mind that those banks are paying out MY money when I make a debitcard purchase, and until the transaction were using MY money, charging others close to 25%, while paying ME less than 1%.

Seems that lop-sidedness alone should be enough compensation without a $5 extortion, I mean service fee.

October 19, 2011
7:08 a.m.
dmorgan says...

"I urge you not to rely on government but rely on God." You had me until that line. How about self reliance and personally responsibility? What does God have to do with it?

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