Is it Time to Abandon Your Debit Card

Posted: October 4, 2011 in Banks, Credit Unions, Debit Cards
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Debit Cards

Debit Cards

With the new Federal Legislation now in place, Banks and Credit Unions stand to lose Billion of dollars in reduced fees. On Saturday, the Federal Reserve instituted a 24 cent cap on swipe fees, estimating that running the card costs banks and credit unions between 7 and 10 cents per swipe. The cap is roughly 20 cents lower than the average swipe fee had been previously. Better known as the Durbin Fee, named after Democrat from Illinois.

What the Feds taketh away, financial institutions giveth back in new fees.

  • Bank of America is going to start charging $5 month for debit card usage. Wells Fargo and other plan to file the same path.
  • Most major banks now are starting to charge for checking accounts, that do not maintain a high balance. Some figures range as high as having an average balance of $1500/Month.
  • Citigroup recently implemented a mid-tier package, called the Citi Account., will carry a $20/monthly fee starting Nov 1 unless customer keeps a $15,000 combined balance in checking, savings, and loans, up from $6,000.

One day before the Senate was expected to vote on delaying swipe fee reform in June, Chase went one step further: Thanks to the Durbin amendment, thousands of Chase customers were warned, your kid can forget about that trip to Disney World. “Congress recently enacted a new law known as the Durbin Amendment that significantly impacts debit cards,” reads the letter. “As a result of this law, we will be changing our debit rewards program. After July 21, 2011 you will no longer earn Disney Dream Reward Dollars when you use your Disney Rewards Debit Card.”

Senate Majority Whip Dick Durbin and Rep. Brad Miller are going on the offensive against Bank of America after the financial behemoth cited Wall Street reform in announcing a new five dollar monthly debit charge last week. Miller, a Democrat from BofA’s home state of North Carolina, plans to introduce legislation that would make it easy for consumers to switch banks and simultaneously swap their direct deposit, electronic bill paying and other automatic features that make moving money from one bank to another more hassle than it’s often worth.

Could this be a boom for smaller banks and Credit Unions?

The savvy marketers for these institutions should jump all over this.

What’s interesting about all this is that the Top 5 banks now control 50% of the assets in financial institutions, while the remaining 7500 control the other 50%. Just 2 years ago, it took the Top 15 banks to control 50% of the assets in financial institutions. So, the facts are clear, the BIG, just keep getting BIGGER.

So the message is clear, take your business elsewhere to avoid these fees.

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