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September 30, 2011

12:32
P.M.

Bank of America: The end of low cost banking?

Total Responses: 28

About the hosts

About the host

Host: Michelle Singletary

Michelle Singletary

Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Thursday and Sunday. Her award-winning column is also carried in more than 120 newspapers. In her spare time, Singletary is the director of a ministry she founded at her church, in which women and men volunteer to mentor others who are having financial challenges.

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Color of Money Q&A Archive

About the topic

Bank of America recently announced its decision to charge customers a monthly fee for debit card usage. Chat with Post financial reporter Michelle Singletary about this decision and what it means for the future of banking for consumers. Also chat about similar decisions banks have made in the past that have affected consumers.

Related: Bank of America to add $5 monthly debit card fee as era of low-cost banking ebbs
Q.

Michelle Singletary :

Well big news in the financial world for debit card users.

So I'm here to talk to you about it and answer your other basic financial questions.

Let's get started.

Q.

Online

Does this apply to using the card online or for paying credit cards?
A.
Michelle Singletary :

I'm not sure of all the fine print in this new development.

From the news reports BOA sounds like they are flat out charging for any debit card use unless you are taking money from an ATM.

– September 30, 2011 12:34 PM
Q.

Banking in Europe

People all complain about Europe, there is a good thing down there. Yes you pay an annual service fee (about 125), but when you go to a atm anywhere in Europe you don't need to pay any additional charges, using your debitcard. The American and Candadian bankingsystem are so outdated that even at the banks they are laughing about it.  - Post commenter paulca

A.
Michelle Singletary :

I hear y ou. But I think what is getting people so upset is when ATMs were introduced and later debit cards it was the banks that said: "Please, please, please use this" because it will save you money and us money. It's cheaper than people going into banks and getting help from a real person.

Now they are saying, "Forget what we told you. We need you to pay to get your cash."

Not fair.

– September 30, 2011 12:36 PM
Q.

BofA credit card v. debit card

I use my BofA card as a "credit card", not debit. Meaning I hit the credit button and I don't enter in a PIN. Do those purchases count in this new rule?
A.
Michelle Singletary :

My guess is those purchases won't count since the banks get a higher interchange fee when you use your debit as a credit card.

But really at this point I don't know. It's very possible you will still be charged since you are still using your debit card.

– September 30, 2011 12:37 PM
Q.

Michelle Singletary :

From news report

Customers will pay $5 each month they use a debit card for a purchase

• No charge for using BofA automated teller machines

• Fee to be phased in starting early next year

• Doesn't apply to customers with, for instance, a BofA mortgage or $20,000 in combined BofA and Merrill Lynch accounts

Source: Bank of America

Q.

Keep the change?

Will BoA stop its "keep the change" program? I really liked having the amount of my purchase rounded up and the change moved into my savings account. It added up over the years. Also, I liked paying with an ATM card because I wasn't carrying around cash. I'll be more anxious about having cash on me, and pickpockets/thieves/muggers will know that there's more cash out there now ...
A.
Michelle Singletary :

I haven't heard the debit fee will change the "keep the change" program.

But one thing. You know plenty of people carry cash and aren't mugged.

Besides studies show that when you plastic -- debit or credit -- you spend more than if you use cash.

Just saying.

– September 30, 2011 12:41 PM
Q.

BoA $5 fee

basic question - so is the fee automatic or will it only be charged if you use your debit card?
A.
Michelle Singletary :

Reports say if you use the card, you get hit with a $5 fee.

Don't use it, no fee.

– September 30, 2011 12:42 PM
Q.

Debit Fee

When I saw the article about the fee, I wondered "where's the beef?" Chevy Chase Bank charged us $2 PER TRANSACTION every time we made a purchase with our debit card and forgot to select "Credit" on the machine. $5 a month is a bargain in comparison.
A.
Michelle Singletary :

The thing is the banks got most of us hooked on it with no fee and now, switharoo.

But for many the $5 fee will be worth it not to have to carry cash.

– September 30, 2011 12:44 PM
Q.

So..change

Why would people rather complain and pay the fee then simple change banks?!?!?
A.
Michelle Singletary :

I agree.

But you and I both know -- as do the banks -- that's it's a pain to change banks. Hard. No.

Pain?

Yes.

– September 30, 2011 12:44 PM
Q.

Is this just the trend?

I'm a long-time BOA customer who will be switching everything back to my other "bank" - the credit union. But am I just fooling myself? Will all banks be ultimately charging for debit cards?
A.
Michelle Singletary :

Honestly, I think this is just like with the airlines.

One jumps out there with a new fee say like charging for bags and the others wait to see if we will just complain and pay. When we do just complain and pay, they jump on board. Now just about every airline has a charge for bags.

The same will happen with debit cards unless people stop using them and go back to standing in line at the bank requiring the institutions to hire more staff.

So are we sheep?

Will we fight back?

My guess is we will be go baa.

– September 30, 2011 12:47 PM
Q.

I'm still confused.

I'm not being facetious at all here, but I don't understand the financial justification for this fee. Normally, a fee can be justified when a company explains that its costs exceed the amount it charges. I assume BOA is making this argument, but perhaps I overlooked the explanation. It would seem to me that BOA would be able to at least pay its costs from the fees charged for debit transactions.
A.
Michelle Singletary :

You are not being facetious at all. You are using common sense.

They get money already from debit card transacations from the merchants. But if you recall those fees were reduced by the Federal Reserve. So they are getting back by charging customers, something they threatened to do if the "swipe fees" they charge merchants were reduced.

The Fed approved a 21-cent limit on so-called swipe fees - about half of the current average swipe fee of 44 cents.

– September 30, 2011 12:54 PM
Q.

fair?

When reading about BoA's new debit card fee, the bank said that some accounts wouldn't be charged the fee - ones with a higher account balance. That seems unfair to me; that the charge hits the accounts least likely to be able to absorb it.
A.
Michelle Singletary :

Yup, well that's capitalism for you.

The rich keep getting the brakes while the regular guy gets hit.

– September 30, 2011 12:54 PM
Q.

Debit cards

Remember when banks encouraged us to use automated systems like ATMs and debit cards so that the could reduce costs by reducing the number of bank tellers, etc. I couldn't believe when they started charging fees to use ATMs and now this debit card fee. I will leave the bank if they institute this. No point in staying if I can move my funds to the credit union I'm a member of. What are they thinking?
A.
Michelle Singletary :

They are thinking that not enough people like you will walk.

And they are unfortunately right.

– September 30, 2011 12:55 PM
Q.

Consumers Fighting Back

I have switched my payroll deposit , as well as, my rainy day savings from BOA to my credit union. I am paying down my BOA credit card to zero and using it only for nominal purchases just to keep the account open. It really wasn't hard at all. Isn't this the type of thing consumers must do to empower themselves above the "fee" crazy retail banking institutions.
A.
Michelle Singletary :

If you don't agree with the fee or how you are treated then you should walk with your business.

– September 30, 2011 12:56 PM
Q.

Bank America fees

Do you think Credit Unions will capitalize on this or do you think that BofA will hear the public outcry and reverse their decision? Or maybe levy this on the casual client, but waive for those with higher balances?
A.
Michelle Singletary :

I think a lot of financial institutions will be watching what happens to BOA. Credit unions have better policies but don't be surprised if many they follow suit.

And BOA already said they will waive the fee for clients with money (ha, ha, ha).

– September 30, 2011 12:58 PM
Q.

BoA Solution

If BoA customers don't want to get hit with a modest $5 monthly fee for paying for goods with a debit card, use a credit card and pay off the amount at the end of the month. Easy peasey.
A.
Michelle Singletary :

Or find an institution that isn't charging the fee.

– September 30, 2011 1:00 PM
Q.

Credit Unions

Are there any issues like this within credit union circles?
A.
Michelle Singletary :

There are banks with free checking. There are banks who aren't charging to use debit cards. Same as credit unions.

Tthe thing you have to do is shop around.

– September 30, 2011 1:03 PM
Q.

Principles of Banking

I thought the whole reason banks existed was so they could use our hard earned money to make money themselves. What happened to the privelidge that banks had to earn money with account-holders' deposits? Interest rates on accounts are virtually zero, so customers aren't getting any return on their deposit. Shouldn't the banks be sucking it up, and just do a better job of making money with the accounts that they hold instead of falling back on customer fees to make money?
A.
Michelle Singletary :

Oh yee of big faith.

The banks have been sucking up fees for years. They earn billions in various customer fees.

– September 30, 2011 1:05 PM
Q.

E-Cash

Can we get the Fed or Treasury to issue us debit cards without fees? That would solve the problem. Many people use them because dealing with physical money is an extra hassle.
A.
Michelle Singletary :

You see that's how they've got us hooked on plastic.

"Dealying with physical money is an extra hassle?"

I see how you many not want to have $1,000 in your wallet to go and pay for a TV or couch set. But cash is better than credit or debit because it for many people forces them to think about what they are spending.

– September 30, 2011 1:07 PM
Q.

I read in my local paper

That Chase is considering adding a charge for online banking. How stupid do they think we are?
A.
Michelle Singletary :

Not stupid.

Sheep.

– September 30, 2011 1:08 PM
Q.

STARTING DATE

I've seen that the debit card fee will start this month. Other places I've seen that it will start in 2012. Which is correct? Also, if this is a trial period, does BOA have a timeline for when they will decide if the fee will continue? I'd also like to know more about the"BOFA CREDIT CARD V. DEBIT CARD" topic. Thank you for your insight!
A.
Michelle Singletary :

The reports say the fee kicks in next year.

If you use your debit card for a purchase you get hit with the fee. Period.

– September 30, 2011 1:12 PM
Q.

BofA Website

The Bank of America website is currently down! I guess one way to drive people to your website is to piss them off.
A.
Michelle Singletary :

LOL!

– September 30, 2011 1:13 PM
Q.

BOA not the only one

I encourage everyone to check with their banks - I remember getting a letter from Suntrust saying that they would start charging a $5 monthly fee for using debit cards on any point-of-sale transactions - this was not the case before.

A.
Michelle Singletary :

Really good point. Becasuse often the institutions will slip in new fees in your statements and you can read right over it (or not read at all since we often toss the notices away.)

– September 30, 2011 1:14 PM
Q.

BoA website

Seems like a lot of people want to jump ship. BoA website has been down all morning. I've starting the slow process to switch to a Credit Union at work. I have a BoA mortage, so the fee would not apply to me, but after I found out they laid off my friend, I am quitting.
A.
Michelle Singletary :

I've heard from a number of people that the site is down. Guess customers are letting them know their feelings.

Good for them.

– September 30, 2011 1:18 PM
Q.

BoA has not rated high on customer service to begin with

I've never heard anything but complaints about BoA, so it surprises me that they would be the first in line to make an unpopular change. Do they just not care at all about their reputation for bad customer service? It seems odd to me.

A.
Michelle Singletary :

Not odd to be at all. The institutions said that people would see higher or new fees if the Fed went thu with reducing the swipe fees and they are living up to that threat.

– September 30, 2011 1:22 PM
Q.

Profits

Am I wrong, or hasn't BofA made pretty substantial profits in the last few years? Do we have a sense of how much the regulations are expected to eat into that (if at all) and how much of that will be offset by this measure? As an aside, my bank (TD Bank) recently started charging $2 per transaction for using other banks' ATMs. Add that to the fees I'm paying the other bank too and I can be paying $5.50 just to get some cash from a machine.
A.
Michelle Singletary :

FYI from a Post story earlier this year:

The [swipe] fees generated $16.2 billion in 2009, and banks used them partly to fund popular debit-card rewards programs and offset the cost of free checking accounts that maintained low balances.

So all you folks who claim you are getting something free with your rewards cards, take notice.

– September 30, 2011 1:23 PM
Q.

BOA expenses on the debit card system

Can you explain what the BOA (or any bank's) expenses are in runnning this system. That is, once it is programmed and runninng, how much does the cost of operation actually depend on transactions? My impression is, it costs a certain amount to set it up, but then basically nothing per transaction, since it must all be fully automated. That would be an argument against the legitimacy of the monthly fee.
A.
Michelle Singletary :

From another post story:

The [debit} transaction itself, an electronic transfer from the customer's checking account to the merchant, costs only a few pennies to conduct but requires a sprawling infrastructure to support it.

But keep in mind that the institutions still are collecting money from the merchants for the debit transactions. Charging customers is just another revenue stream.

– September 30, 2011 1:26 PM
Q.

Bof A and Value based pricing

For a lot of businesses there has been a change of pricing strategy from cost basis to value basis. This shift has occured gradually over the last 30 years or so. The idea is that with enough technology we can analyse customer behaviour and demand well enough to take a good stab at what price is going to maximize profits as opposed to the old cost plus a percantage approach. This type of fee would seem to be an example. Would you agree? And does this utimately lead to the type of fairness questions that could be asked in a policy conversation. Because a firm can get that price, is it fair? And does it effect quality of life for some in ways that we want to question?
A.
Michelle Singletary :

Great point.

The institutions have us hooked on debit and to a larger extent credit -- plastic.

So they can charge what they want because we will pay it -- up to the point. Their challenge is to find that breaking point where customers balk. BOA might find that with the debit card fee.

But credit card companies found that in many respects most customers were willin to pay double digit interest rates to be able to buy now and pay later.

Time will tell if enough people oppose the debit card fee whether BOA or others will roll it back or cut it out.

– September 30, 2011 1:29 PM
Q.

Bank of America debit card fee

How do we work with this scenario?: The post office in Corvallis, Oregon, has a prominent sign that encourages customers to use debit cards because it costs the post office less to process a debit transaction than a cash transaction And, is this notice right or wrong?
A.
Michelle Singletary :

I think it's fair for the merchant to say if you use this form of payment it cost me less. Then they should pass that savings on to customers in the way of lower prices.

– September 30, 2011 1:31 PM
Q.

Similar situation

This really isn't all that different than the cable company raising your monthly rate.... we all hate it, but switching to satellite/FIOS/streaming TV/whatever alternative is a big fat pain... not hard, but a pain.... so we live with it and they profit.
A.
Michelle Singletary :

Exactly!

– September 30, 2011 1:31 PM
Q.

Michelle Singletary :

Hey thanks for joining me today. Lively conversation about something that impacts so many.

But as I always tell folks, if you don't like how a business is treating or you think the prices are unfair, walk. Don't be a sheep.

Take care. I'll be back next Thursday for my regular online video and text chat.

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