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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.

By MSN Money Partner Nov 3, 2011 12:21PM

This post comes from Jeanine Skowronski at partner site MainStreet.


MainStreet on MSN MoneyBanks 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:

Nov 4, 2011 5:00AM
We bail out the banks and they stick it to us... This is why there is an occupy wall street movement happening. 

Time to shift the wealth from these greedy corporations. 

It's ok to make money but not off the backs of the poor.

Nov 3, 2011 5:05PM

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.

Nov 3, 2011 7:09PM
So now that all big banks have backtracked on their plans to charge debit card fees, where does that leave us? Will they, humbled by popular outcry and cowered by politicians' threats, give up on their plans to make up for the huge revenue losses they will suffer as a result of the passing of the Durbin Amendment? No, they will not. What will happen instead is that the card issuers will find other, less conspicuous ways to get what they want. They will learn from the debit card fee disaster and devise more subtle strategies to achieve their objective.

When the dust settles, new revenue sources will be found and the issuers will recoup their losses. The upshot will be a rise in revenue for retailers, due to lower card processing fees, at the expense of consumers who will end up paying higher bank fees of some sort or other. The card issuers will not be worse off than before the Durbin Amendment was enacted and may actually be better off.
Nov 3, 2011 2:23PM

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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