Photo: stevendepolo via flickr
When Bank of America announced its $5 monthly fee on debit card accounts, it went from being one of America’s most convenient banks to one of its most hated in a matter of days.But while we’re aggravated with the bank’s disregard towards consumers in hard times, Bank of America’s decision should actually be applauded, writes Michael Hiltzik in the Los Angeles Times.
Without the $5 fee, consumers wouldn’t have known just how much the banks were making on debit card purchases because these fees were previously “hidden” or unspoken. They also didn’t realise these costs were being “passed on to them in the form of higher prices at the register,” says Hiltzik.
Now the $5 fee has revealed the truth: The average cost per transaction is 44 cents, though the real average cost per swipe is only 13 cents, or as low as four cents, when the bank’s share is not accounted for, says Hiltzik.
According to a Fed survey, these hidden fees have generated $16.2 billion in annual revenue, and the banks have pocketed around $11 billion of it.
The Durbin rule put a cap on these fees and consumers only paid an estimated 21 cents per transaction, around half of the previous cost. Again, the real cost per transaction was only four cents.
With Bank of America’s fee disclosure, consumers now know the fees they’re shelling out and can make decisions as to whether they want to pay them. The reality is harsh, but at least we have some perspective.