Over the last few years, banks have seen their core business
model come under attack.
, merchant businesses, and angry customers are all facing off
against Wall Street to stop banks from putting a big price tag on
But banks are fighting back. As quickly as Congress can plug up
potential profit centers, banks come up with new ways to make
money. One recent money-making idea, though, seems destined to fail
-- as long as customers stand firm.
Attack of the killer fees
) announced it would start charging monthly fees to debit card
users in four different states. The $3 monthly fee will take effect
Wells Fargo won't be the first bank to make this move.
started a similar test program
for customers in limited areas.
Why does your bank hate you?
The new fees appear to be a direct response to the
Federal Reserve's limitation
on the fees that banks charge retailers when customers use debit
cards at the register. The Fed cut the old $0.44 per transaction
fee by more than half.
But the problem with this explanation is that many other
revenue-increasing bank moves also appear linked to debit card
limits and related laws. For instance:
- Wells, Chase, and
) already stopped offering
rewards on their debit cards
) reportedly considered changes to its program earlier this year
but didn't take immediate action at the time.
(MA) have each outlined plans to change the way they charge
merchants. Visa has introduced a "network participation fee"
whereby merchants would pay greater fixed costs to offset the
lower caps on per-transaction charges, while Mastercard has said
it prefers a more deal-specific approach.
Bank of America
(BAC) and Citi were among many banks making major changes to
their free checking account offerings early in 2011. The moves
will make it harder to qualify for fee-free status.
Rather than trying to see these moves as retaliation for lost
revenue from debit-card fees, you should instead look at them for
what they really are: a simple attempt to boost profits.
This is what competition's all about
There's no reason to feel outrage toward banks that try to raise
their fees. Like airlines boosting fares or restaurants raising
their menu prices, banks do the same thing as any other business by
trying to make the most money they can. Contrary to what the
general public seems to think, all the government bailouts in the
world aren't going to turn the banking system away from its
capitalist, shareholder-favoring roots.
Instead of outrage, you need to use the weapon that capitalism
: the ability to stop doing business with your bank and go to a
competitor instead. Big Wall Street institutions are banking on
jumping ship; otherwise, they wouldn't try to push higher fees
through at the potential cost of losing your business entirely.
At least for now, plenty of competitors are ready to snare you
away from those fee-grubbers. Whether it's another national banking
chain or your local credit union, you'll find that once you look
for alternatives, you'll often get much better deals -- not only on
credit and debit cards but also on savings rates, mortgage loans,
and other banking needs.
As a customer, you owe it to yourself to make these higher fees
blow up in big banks' faces. All it takes is a little legwork to
find an alternative that treats you the way you deserve.
Give yourself some credit
After years of getting you hooked on the convenience of debit
cards, banks are pulling a classic trick: charging you for what
you've gotten used to having for free. But you don't have to put up
with higher fees. Take your business to a bank that will respect
you, and you'll have the last laugh over Wall Street.
Tired of banks that won't pay you any interest on your
hard-earned money? Get that money invested today. Take a look at
these two small stocks that the government can't afford to let fail
even in tough times.
doesn't let banks push him around. You can follow him on
. He doesn't own shares of the companies mentioned in this
article. The Motley Fool owns shares of Bank of America, JPMorgan
Chase, and Citigroup. The Fool owns shares of and has created a
ratio put spread position on Wells Fargo.
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