The first scuffle between big banks and consumers is over. Banks took their monthly debit card fees and went home after angry customers complained loudly about having to pay to access their own money and threatened to switch to credit unions or community banks. Some customers made good on that threat, with credit unions bragging about increased deposits since word spread that Bank of America was planning to charge customers a $5 monthly debit card fee. BOA abandoned that plan last week.Consumers 1, Banks 0.
But it's only the beginning, as big banks will lose roughly $8 billion in revenue now that the fees they can earn on debit card transactions were sliced from an average 44 cents to 21 cents per transaction (which is still significantly more than it costs for banks to process a debit card transaction, according to Federal Reserve research).
So what fees will banks think of next?
Increasing the fees we're already used to, and eliminating perks. We're seeing banks do both, says Bankrate.com's Greg McBride. According to their latest checking survey, only 45 percent of non-interest checking accounts are free, down from a peak of 76 percent two years ago. Overdraft fees have been on the rise for 13 straight years. ATM fees have been climbing for seven. Debit cards that offer rewards? Down 30 percent.
Bill Hardekopf, founder of the credit card research site lowcards.com, says he expects increases in credit card interest rates. While bank income was hit due to changes with debit card rules, "I don't think they have to make up the money from debit card customers," Hardekopf explained.
A single fee for a buffet of services. Instead of paying à la carte for debit card use, online bill pay and high-tech budgeting tools, banks will charge a low monthly fee and list everything you get for that price. "By pricing and charging for each individual service, they'd only be perpetuating this notion that they're nickeling-and-diming their customers to death," said Ron Shevlin, a retail banking analyst with the Aite Group in Boston. The trouble with a buffet, in my view, is if you only want to eat a little, you're still charged the same. And it's impossible to know exactly how much your dessert would have cost on its own.
But analysts argue that consumers are more likely to swallow a monthly fee for several services, especially as more banks offer nifty new technologies such as using your cellphone to make purchases and depositing checks by taking a picture.
Rewarding consumers for multiple accounts. Some analysts think banks will assess a monthly fee for checking, unless the account holder keeps a minimum balance in the account and has a mortgage, car loan, or credit card as well. Shevlin predicts we'll see more pay-less-if-you-have-more-accounts-type relationships.
