Ready for A Debit Card Tax?

[krome2ez]

Morning Bell: Ready for A Debit Card Tax?

Mike Brownfield

October 3, 2011 at 9:27 am

(10)

Use a debit card? Now it’s really going to cost you. Bank of America announced last week that it will begin charging customers $5 per month for use of their debit cards. But if you’re looking for someone to blame, set your sights on Washington.

Bank of America is imposing the new fee in anticipation of a $2 billion annual loss brought about by the “Durbin Amendment” — a provision of last year’s Dodd-Frank Wall Street financial reform bill.

Signed into law in July 2010, the measure was intended to protect America from another financial meltdown, but in reality it placed a boatload of new burdens on financial institutions and their customers. The results? Increased risks to the financial system, increased regulations, and in this case, increased costs to anyone who uses a debit card.

Under the Durbin Amendment–named for its backer Senator **** Durbin (D-IL)–the federal government now limits the amount of money banks can charge merchants when you swipe your debit card, costing them an estimated $6.6 billion per year in revenue. Rather than recoup their costs from merchants, banks are looking to consumers to pay the bill.

Enter Bank of America’s new fee. But they’re not alone. Wells Fargo expects to lose $1 billion, prompting it to adopt a $3 fee for debit cards in some areas. JPMorgan Chase is also rolling out new fees, as is Citibank. Smaller banks are getting into the game, too, as the Associated Press reports. Atlanta-based SunTrust recently instituted a $5 debit card fee, while Regions Financial in Birmingham, Alabama, will begin charging a $4 fee next month. In Texas, International Bancshares has announced last week the closure of 55 branches in grocery stores and the loss of 500 jobs.

Heritage’s Diane Katz explains that free debit cards aren’t the only things to disappear under the new law. Katz writes that a study fromBankrate.com found that the proportion of free checking accounts (of the non-interest variety) has fallen this year to 45 percent from 65 percent in 2010 and 76 percent two years ago. According to the 2011 Checking Account Survey, the number of free accounts “is likely to drop further as banks and their customers adjust to recent regulatory changes in banking.” And, Katz says, those who can least afford it will pay the price:

The new fees will hit lower-income families the hardest. That’s because banks often exempt premium accounts from user fees to nurture more profitable customers. Faced with higher fees, some cash-strapped consumers will migrate to credit cards—if they can qualify. More stringent regulations have tightened the availability of credit while also increasing interest rates and fees.

In typical populist fashion, Senator Durbin sold his amendment as consumer-friendly. But any regulation that increases consumer costs and raises consumer debt is inherently anti-consumer and economically destructive.

Bank of America is already seeing a backlash from its decision. Its stock dropped by more than 3.5 percent on Friday, and its website was hit with outages and glitches over the weekend (drawing speculation of attacks by disgruntled hackers). But that anger should be directed at Washington, which passed the regulations leading to the Durbin tax. And there’s one thing Congress can and should do to solve the problem: repeal it.

http://blog.heritage.org/2011/10/03/morning-bell-ready-for-a-debit-card-tax/?utm_source=Newsletter&utm_medium=Email&utm_campaign=Morning%2BBell

[gsxr600]

It is quite simple consumers cut up their bank cards and then the banks will rethink their new idea. If millions of customers would stand up for themselves this would be quite the easy fix. The question is do consumers have the stomach for that? Personally I paid off all my credit cards, cut most of them up and I wont hesitate to give up my debit card. I refuse to pay money for using my own money.

[Darin]

It is quite simple consumers cut up their bank cards and then the banks will rethink their new idea. If millions of customers would stand up for themselves this would be quite the easy fix. The question is do consumers have the stomach for that? Personally I paid off all my credit cards, cut most of them up and I wont hesitate to give up my debit card. I refuse to pay money for using my own money.

Would not be the "smartest move" in my opinion.

Result?

People relying on a more cash style lifestyle which leads to less money in the bank.

If anything, most banks should be saving on the concept that more and more customers have gone paperless.

They also use their check cards frequently. Take away the ease, and the last bank to implement this will likely receive the bulk of new customers.

Btw, $5/12 = $60/yr. Doesn't sound like a whole LOT, but the idea is still going to annoy some.

[jgreene]

you are a fool for using a debit card anyway...way less secure....only time to pull one of those out is at an ATM to get cash....otherwise use a credit card and pay it off monthly....

[nettie]

Cash is KING!!!!!!!!!! I'm a firm bleiever in using cash, if I don't have the cash then I just don't buy it! JMO

[Francie26]

Would not be the "smartest move" in my opinion.

Result?

People relying on a more cash style lifestyle which leads to less money in the bank.

If anything, most banks should be saving on the concept that more and more customers have gone paperless.

They also use their check cards frequently. Take away the ease, and the last bank to implement this will likely receive the bulk of new customers.

Btw, $5/12 = $60/yr. Doesn't sound like a whole LOT, but the idea is still going to annoy some.

It annoys the heck out of me!! I feel like it's another tax, although it isn't. This government already "nickles and dimes" us silly, and now this same attitude will be taken by the banks??!! I won't pay to use my own money, either. I'll just decide how much I'm going to spend and take that much cash with me. It will probably even save me money. So if my bank tries to charge me this fee, I'll give them back my debit card, cut into pieces just as I would do with a credit card.

[ems]

“Durbin Amendment” ... was intended to protect America from another financial meltdown, but in reality it placed a boatload of new burdens on financial institutions and their customers. The results? Increased risks to the financial system, increased regulations, and in this case, increased costs to anyone who uses a debit card.

... International Bancshares has announced last week the closure of 55 branches in grocery stores and the loss of 500 jobs.

Whenever Congress says they are passing a law to protect consumers, watch out: we're about to get a financial spanking. Increased risks... increased regulations... increased costs... increased unemployment. It's time we wake up and realize that Congress does not act on behalf of individuals; rather, it acts on behalf of lobbyists. Please remember to clean out the rats from the halls of Congress next election.

[Heavyduty053]

Morning Bell: Ready for A Debit Card Tax?

Mike Brownfield

October 3, 2011 at 9:27 am

(10)

Use a debit card? Now it’s really going to cost you. Bank of America announced last week that it will begin charging customers $5 per month for use of their debit cards. But if you’re looking for someone to blame, set your sights on Washington.

Bank of America is imposing the new fee in anticipation of a $2 billion annual loss brought about by the “Durbin Amendment” — a provision of last year’s Dodd-Frank Wall Street financial reform bill.

Signed into law in July 2010, the measure was intended to protect America from another financial meltdown, but in reality it placed a boatload of new burdens on financial institutions and their customers. The results? Increased risks to the financial system, increased regulations, and in this case, increased costs to anyone who uses a debit card.

Under the Durbin Amendment–named for its backer Senator **** Durbin (D-IL)–the federal government now limits the amount of money banks can charge merchants when you swipe your debit card, costing them an estimated $6.6 billion per year in revenue. Rather than recoup their costs from merchants, banks are looking to consumers to pay the bill.

Enter Bank of America’s new fee. But they’re not alone. Wells Fargo expects to lose $1 billion, prompting it to adopt a $3 fee for debit cards in some areas. JPMorgan Chase is also rolling out new fees, as is Citibank. Smaller banks are getting into the game, too, as the Associated Press reports. Atlanta-based SunTrust recently instituted a $5 debit card fee, while Regions Financial in Birmingham, Alabama, will begin charging a $4 fee next month. In Texas, International Bancshares has announced last week the closure of 55 branches in grocery stores and the loss of 500 jobs.

Heritage’s Diane Katz explains that free debit cards aren’t the only things to disappear under the new law. Katz writes that a study fromBankrate.com found that the proportion of free checking accounts (of the non-interest variety) has fallen this year to 45 percent from 65 percent in 2010 and 76 percent two years ago. According to the 2011 Checking Account Survey, the number of free accounts “is likely to drop further as banks and their customers adjust to recent regulatory changes in banking.” And, Katz says, those who can least afford it will pay the price:

The new fees will hit lower-income families the hardest. That’s because banks often exempt premium accounts from user fees to nurture more profitable customers. Faced with higher fees, some cash-strapped consumers will migrate to credit cards—if they can qualify. More stringent regulations have tightened the availability of credit while also increasing interest rates and fees.

In typical populist fashion, Senator Durbin sold his amendment as consumer-friendly. But any regulation that increases consumer costs and raises consumer debt is inherently anti-consumer and economically destructive.

Bank of America is already seeing a backlash from its decision. Its stock dropped by more than 3.5 percent on Friday, and its website was hit with outages and glitches over the weekend (drawing speculation of attacks by disgruntled hackers). But that anger should be directed at Washington, which passed the regulations leading to the Durbin tax. And there’s one thing Congress can and should do to solve the problem: repeal it.

http://blog.heritage...=Morning%2BBell

I will not pay anymore because they can't make a couple of hundred million more. They are fixing to stab themselves in the foot if they do this because it will cost them customers and they will lose what they were making. Do i feel bad for them, no way i would love to see some millions go broke then they can live like me.

[detroitjazzman]

I was in BOA today, one of the banks that I use. I asked the manager during a general conversation. I asked about that $5.00 fee per month for using a debit card. She informed me that as long as I maintained my current balances, that policy will not apply to me. I would suggest that if this applies, might want to get with your bank and arrange for the proper accounts to prevent this or any other fees.

[jeepguy]

i use cash ---unless i see tom griswold { boband tom show} in line behind me then i write a check ,,, paging richard smoker is there a richard smoker in the house ????

[WallyWeaver]

To follow-up on detroitjazzman... I stopped by my B of A and they said the $5/ month fee applies only to those who have a checking account only. I have a checking account, a savings account, and my home loan is through B of A so I was informed that I would not be paying the fee (they already make enough off of me through my other accounts, I suppose).

I do, however, agree with the premise of the article. Nice work Congress! All you added was more ineffective regulation that the banks figured a way around.