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Saturday, September 23, 2023


Banks swindle customers with debit card fees

If there was ever a textbook example of corporate greed, it would be Bank of America CEO Brian Moynihan. In a statement issued last Wednesday, following Bank of America’s declaration that it will now start charging a $5 fee on debit cards, Moynihan claimed that the act was not out of greed, but rather a sound business tactic focusing only in helping the bank make ends meet. According to Moynihan, just like everyone else in America, banks “have a right to make a profit.”

First let me express that I understand just as much as the next corporate CEO how everyone is entitled to make money. There is no reason to argue against the saying “money makes the world go round.” If I want to keep the lights on at home and food on the table, I need money. But there is a fine line between maintaining a business and being outright greedy. On one side, we have a blue-collar man making ends meet and a small business owner keeping his store running. In the middle, there’s the CEO straddling that very fine line between keeping the shareholders happy without curb stomping the general public with unnecessary fines.

In defense of Bank of America’s new fees, Moynihan cited the Dodd-Frank Act, stating that the bill will cost Bank of America and big banks billions in revenue. Although Bank of America has been taking the brunt of the backlash so far, it isn’t the only bank deciding to institute these new charges. Citibank has also decided to put in place fees in response to the Dodd-Frank Act. Wells Fargo and Chase are still testing the waters. What’s the lost revenue the banks are citing as drastic enough to start implementing fees on debit and credit transactions? Evidently, it’s the Durbin Amendment, an amendment that contains a provision allowing the Fed to dictate how much banks are allowed to charge on service fees for transactions with credit and debit cards.

The banks acted according to the laws of economics and fixed costs; the government made running a business more expensive, so banks put in the new fees to compensate. However, does this make it any less of a slight to the American people? Are the banks, therefore, absolved from the guilt that should now be focused on the Fed for interfering in the free market?

Absolutely not.

While the banks are simply reacting to fixed costs, it does not change the fact that the American people are still getting the short end of the stick. It’s one thing to charge a small service fee for transactions with a card. After all, it is through the bank’s system that you’re able to use your card instead of having to carry cash with you at all times. It’s another thing to impose a $5 monthly fee to an account, even if it does appear to even out the estimated $2 billion in lost revenue that the Dodd-Frank Act is said to cause. However, what isn’t taken into consideration are people who don’t use their card for every pack of gum and lottery ticket they buy. By the end of the year, every one of the estimated 57 million Bank of America customers is estimated to lose $60 a year. This will result in $3.42 billion in new revenue for the bank. That’s right, the Dodd-Frank Act just helped out Bank of America by giving them a weak justification for about $3.42 billion of scraped together American money.

The decision to replace lost revenue with a fee was easy for the banks to make, especially when the compensation they receive is more than the revenue they lost. They can cite it as reactionary, not malicious — just another reason why the government should stop meddling in Wall Street’s financial affairs. There’s no argument here that suggests that the government should clamp down even further on the banks, because, as is apparently the trend, banks have no soul and will just pass the cost onto consumers. This is usually the case with fixed costs. So what should average consumers like me and you do to overcome this? Engage the free market for what it’s worth and stop banking with these banks. Or, at least the ones that have implemented the fees.

In the end, it’s up to the customer and how willing they are to keep putting up with the banks and the politicians. What needs to be reiterated is that these banks should be bowing down to the American people, not the other way around. It shouldn’t be us that “understand what (Bank of America is) doing” as Moynihan said. It should be the banks that understand that we’re fed up with all this nonsense and that whatever action we choose is a result of it.

If your bank is implementing these fees, tell them what you think by closing your accounts and moving to a competitor that won’t charge you for them. They can’t make up for lost revenue with fees when they’re suddenly running low on accounts to charge. Moynihan is right, Banks do have the right to profit and we have the right to choose.

James Wang is a history freshman and may be reached at [email protected].

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