Are you angry that banks are now charging you to use your own money?
When Bank of America announced their (bad/dumb/stupid/greedy) decision to start charging me and millions of other people for using our debit cards to access our own cash that they make a fortune using and lending out, I was pretty well ticked off. As an MBA and a business owner, I understand the regulatory environment changed because of a short-sighted Congress who wouldn’t know their belly-button from a hole in the ground (this is a family blog) and I do understand the revenue shortfalls this too-big-to-fail bank will experience. But dang it, that’s MY money and we’ve been conditioned for the last 20 years to use our debit cards instead of credit cards and now the game changes in mid-stream.
When you or I use a credit card to make a purchase of say, $100, the merchant only receives about $97. The remaining $3 is used for processing the card — a portion goes to American Express, MasterCard, Visa, or Discover, a portion goes to the card processor, and a portion goes to the bank who handled the money. When you or I use our debit card, typically there isn’t as much going on — essentially this becomes a simple online transfer of funds from your checking account to the merchant’s, handled by a card processor. What recently happened was that Congress placed a limit on the amount that processors and banks could zing merchants … now just 21 cents per transaction. Swipe your debit card to buy a $4 latte and the processor gets 21 cents … swipe it to buy a $1,000 LED television and the processor also gets 21 cents. Processors aren’t happy and neither are the banks, so the banks are responding by charging an additional fee for debit card use to make up for their lost fees. Guess who pays?