Banks' take from debit fees? $875M a month
The much-despised debit card fee is dead. But if it had survived, it would have made the big banks a heap of money.
This post comes from Jeanine Skowronski at partner site MainStreet.
Banks could have made up to $875 million a month off of their now-dead debit card fees, according to an analysis (.pdf file) from Market Rates Insight.
The projections are based on each of the 175 million U.S. adults with bank accounts paying a monthly $5 fee, the amount Bank of America had planned on charging its customers before becoming the last major bank to ditch its debit card fee on Tuesday.
Wells Fargo and Chase were testing $3 and $3.50 fees, respectively, when they both decided to pull their pilot programs late last week. Post continues below.
But Market Rates Insight says the fees -- as well as the consumer backlash they incurred -- could have easily been avoided if banks had simply lowered their deposit rates by just 0.01%. This decrease would have reduced interest expense at financial institutions by $1.5 billion per month and netted almost twice the amount debit card fees would have brought in.
Market Rates Insight's analysis isn't the first to indicate debit card fees were never really necessary.
Earlier this week, Odysseas Papadimitriou, CEO of credit card comparison website Card Hub, pointed out that checking account fees already recoup well more than the $28 per customer that financial institutions will lose each year as a result of the Durbin Amendment, the legislation most banks attributed as the reason for instituting new charges.
Should consumers expect other fees to replace the dead debit card charges? MainStreet investigates what could (or could not) come next.
More on MainStreet and MSN Money:
I like the authors analysis of the amount of fees.
175 Millon customers x $5.00/month. And BOA (and I am sure others) had several ways that their PREMIUM account holders could easily avoid the fee.
Didn't even take that into account. Not shocking considering the typical mentality of the writers of these articles.
Regardless. Bank of UNAmerican can reduce their OUTRAGEOUS bonus pool of 4.4 BILLION DOLLARS paid in 2010 by half and EASILY cover all losses from the debit card rules.
Fees or not, I can't understand why anyone uses debit cards if they don't have to. You have no protection from fraud like you do with credit cards. If someone gets your info they can drain your bank account before you get it cancelled.
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