Banks React to the CARD Act.
Posted: March 21st, 2011 | Author: Joe | Filed under: Banking | Tags: Banking, CARD Act, Credit Card Accountability Responsibility and Disclosure Act, debit cards, Fees | 2 Comments »It seems like only last year that the consumers were going to get some justice, and the banks would pay a price for all their sneaky tactics. Well, actually it was 2 years ago when the CARD act was passed into law and we are now seeing what only politicians who supported the bill could claim as “unintended” consequences.
Namely, Banks are looking at increased costs of doing business and a loss of revenue. Anytime ANY business see an increase in the cost of doing business – be it from increased taxes, or increased costs of raw materials – those costs get passed along to the consumer.
Here are 3 ways banks are passing along the costs of all that wonderful new regulation…
Higher ATM fees
JP Morgan Chase and HSBC are two of the mega-banks that have opted to charge non-customers who use their ATMs a fee. In the case of Chase, it’s only in Illinois and Texas and the fees are $5 and $4 respectively. It’s a trial to see if they can raise enough revenue to justify the new fee nationwide.
When you consider that most people use ATMs for quick cash, in $20 denominations you’re looking at what amounts to a 12.5-25% fee for a $20-40 withdrawal! And that’s on top of anything the non-customer’s own bank charges for out of network ATM use!!
Meanwhile, HSBC is imposing a $3 fee nationwide to non-customers who use their ATM network.
The end of free checking
Bank of America, Wells Fargo, Citi and Chase are all ending free checking as we know it. Some will continue to offer “free” checking, while others will simply discontinue the practice altogether.
BofA will be adding checking fees over a two year period, starting with new customers. Bank of America is going to start charging fees of $9 – $25 for customers who don’t maintain a certain minimum balance level. I’m not sure what that level is.
Wells Fargo is planning to start charging $5 a month for new checking, and its CEO has warned that more costs will be passed along to customers in the near future.
Citi bank is going to start charging customers who make less than 5 debit card purchases per month an $8 fee for checking.
And Chase has started charging customers who don’t maintain a minimum balance a $10 per month fee on the West cost, and $12 everywhere else. Again, no mention of what that minimum balance is.
Maximum limit on debit card purchases
Finally, due to a limitation on interchange fees (what banks charge stores for every swipe of your card) many banks are considering a limit on debit card purchases.
Since the government regulation seeks to cap the amount banks can charge stores for the transaction, and banks don’t want to lose revenue they are thinking of limiting the amount you can purchase on your debit card, thus minimizing their losses and maximizing the number of transactions.
This is a great case of where a regulation that seeks to limit excessive fees results in the exact opposite and adds further inefficiencies to boot!
JP Morgan Chase is considering a $50 -100 limit. If that becomes reality, a lot of people are going to have a hard time filing up at the pump soon!
Final thoughts
Anytime the government mandates or regulates, costs go up. Sometimes consumption goes down as a result, but usually consumers just end up poorer. This is an excellent case in point. The CARD Act of 2009 is going to cost consumers and set banking back a decade or more.
We already see this with the end of free checking. It was not long ago that banks charged for basic checking, but as revenues rose, banks could offset the cost of checking and offer that as a free service to consumers. Not anymore.
How many other services do consumers take for granted, only to see them eventually eliminated or become offered to a select few for an additional charge? Time will tell.
In the meantime, the best bet for consumer is to avoid the mega banks altogether and stick to local or regional banks and credit unions.
Sources:
New ATM fees
phot by islandgal
I’ve been more and more disappointed with my bank ever since WaMu got bought by Chase. I got the letter for the new minimum balance requirements and meet them, but am still bothered that the services I have come to expect are slowly being taken away. I haven’t had that final straw to move to a credit union yet, but I’m getting close.
[...] = {"data_track_clickback":true,"ui_language":"en"};I’ve already chronicled the many “unintended” consequences of the CARD Act of 2009 that affect consumers, but it looks like there’s a new one that affects business [...]