Oh no, someone is proposing a “run” on the banks! Hide the children and womenfolk, or at least do what banks do and lose the mortgage note.
“Incredible,” headlines the Washington Times, “Dick Durbin urges run on Bank of America.”
“UNPRECEDENTED,” echoes Fox News. “Dick Durbin Tells Citizens ‘Get The Heck Out’ of Bank of America”
This is silly stuff. You would think that far-right news outlets would praise Sen. Dick Durbin (D-IL) because he’s suggesting that citizens make free-market choices in their best interest.
The issue here is the debit card swipe fees have finally been reduced. With less money coming in, several major banks now want to charge a monthly fee for the use of a debit card. For its part, the Bank of America wants $5 per month or $60 per year.
As Durbin explains:
“It seems that old habits die hard for Bank of America. After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers. It’s overt, unfair and I hope their customers have the final say.
“Earlier this year the Federal Reserve determined that the interchange fees Visa and MasterCard fix for big banks grossly exceed the cost of processing a debit card transaction by some 400%. These hidden fees were designed to boost big-bank profits by charging small businesses and merchants every time a debit card was swiped. And profit they did. Bank of America hauls in billions in debit interchange each year.”
Not a Loan
Debit cards involve the use of account holder money, no loan is involved. The bank gets the “float” for holding the cash and with more on deposit can make additional loans. Traditionally there’s no charge for putting your money in a bank, though effectively this is the result of monthly fees for debit cards use.
Durbin also said “we passed a law over 1 year ago — an amendment that I offered to the Dodd-Frank Wall Street Reform Act — which said to the Federal Reserve Board: Investigate this. Find out how much it actually costs the bank and credit card companies to process a transaction with a debit card. They came back, after a long study, and they said: If it uses a PIN number, which some do, it is about 4 cents. If we sign it, it is about 7 to 12 cents. Then they said: Incidentally, the average charge by the credit card company and bank for each swipe fee is 44 cents — dramatically larger than the cost of the transaction to the bank or the credit card company.
“Remember, in the old days, when we processed checks? It cost pennies to process a check no matter what the face amount was. But now, retailers face the 44-cent average swipe fee every time somebody uses a debit card. So we can understand some retailers don’t like this much. There is no competition. These banks and credit card companies tell them this is it, take it or leave it; if they don’t like it, don’t use plastic. It is secret. Nobody knows it except the retailer, the bank, and the credit card company. It is a hidden fee, and it is a killer for a lot of small businesses.”
There are a lot of depository institutions out there if you need to bank. Take a look at community banks, local S&Ls, and credit unions. They may not have international operations or lots of derivatives but most people don’t care, all they want is a safe place to keep their money without excess cost. It shouldn’t be too much to ask.