Money, Money, Money

Like many consumers, my wife and I recently received a letter from our banking institution that they would begin implementing a debit card usage fee.  In essence, the bank was going to start charging their customers a fee each month if we used our debit card even once.  The fees being used by the different banks appears to range from $3-$5 on average.  Our current bank, Regions, is using a $4 debit card usage fee against their customers.  I decided to post my thoughts on this penalty fee from the banks because I have found that many of my friends and neighbors feel as if they have no choice but to endure the charge.

The real issue at hand is that the banks are not making as much money as they would like to make to be able to meet their budget and profit projections, so they have decided to pass the buck of responsibility on to the consumer.  I do not begrudge the banks from making money.  After all, they are businesses that need to make money like all other businesses.  The ironic part of all of this to me is that several years ago the banks were encouraging their customers to use their debit cards more because it was a way to generate more revenue for the banks.  Now they want to penalize their customers for the very action that they so strongly encouraged them to engage in before.  I worked for Wachovia Bank for almost three years while I was in seminary.  I do not claim to be a financial adviser nor do I understand all of the ins and outs of the banking world.  But I do have a little bit of experience with banks and a little bit of common sense.

The Bank's Smoke Screen

• "We are losing money."  The banks will tell their customers that due to Frank-Dodd Act passed by congress they are no longer able to charge as much for interchange fees when consumers use their debit cards.  In essence, the merchant's (store) bank can no longer charge the consumer's (you and me) bank as much as they used to for debit card transactions.  Therefore, the banks are looking for ways to generate more revenue to make up for "lost" revenue.  I would agree with the banks that the government should stay out of the way.  A free market economy will struggle from government intrusion as we have seen over the last few years.  However, the banks are like the oil companies and airlines when they start whining that they are "losing" money.  They are not losing money they just are not making as much as they would like.  Now in my household over the last few years we have "lost" money as well thanks to the economy.  However, we do not have someone to pass the bill on to so we have to adjust our budget spending.  For some reason the banks seem to think their only solution is to increase their income by penalizing their customers in new and creative ways rather than adjusting their expenses to meet their income.  [Just by way of comparison.  I met with the branch financial manager at Westside Bank in Mableton, Georgia today.  This is small bank in the metro Atlanta area that operates with a small town bank philosophy and feel.  The manager actually was able to share specific steps their bank is taking in order to keep their overhead costs low so that they can continue to offer their services at lower rates if not even free in most cases.  In comparison with BB&T and Regions banks, Westside may be smaller in the number of customers and branches, but their minimum daily balance requirements are lower and their interest rates are higher.  The big banks are making themselves irrelevant.]

• "Customers have the mistaken idea that banks' services should be free."  I had one personal banker say this to me as I visited in her office to learn about their products to determine if their bank might be the right fit for our family.  Even though her bank does not currently charge a debit card usage fee, we will not be using their bank because her statement identifies a basic philosophical difference.  She believes that they are justified in doing whatever they want and the consumer will just have to live with it.  I'm not against the banks charging for their services.  They always have had some type of tiered structure for their accounts that guarantees them income.  They have also always had incentives within this tiered structure to generate more revenue for their bank while giving the customer the chance to avoid the fees.  For example, most banks will waive the monthly "maintenance" fee on their checking accounts if the customer has a certain average daily balance, direct deposit or a certain amount of funds in all of their accounts combined.  These incentives give the consumer the opportunity to avoid fees while helping the banks to ensure they generate revenue and increase their assests/holdings.  I think a better way to have approached this debit card fee would have been to have used a tiered structure for it as well.  For example, allow customers a certain number of debit card transactions each month before the fee is enacted.  This tiered approach could be structured to be in line with the tiered structure of the different types of checking accounts the bank offers.  This approach would also have allowed the banks to implement a higher debit card fee since they at least gave the customer a chance to avoid the fee.

• "Everybody's doing it."  As I sat with the branch financial manager at my local Regions branch today, she tried multiple times to spin the story that all banks will eventually go to such fees.  She may be right about the long term, but she is wrong about right now.  I found four financial institutions in my community/area this week that are not currently using a debit card fee.  So, the reality is that not everybody is doing it.  And until they do I am not going to be forced to pay a penalty for spending my money.

Encouragement For My Fellow Consumers

• Take Responsibility for YOUR Money.  Think about it this way.  Would you intentionally take $4 and throw it in the trash can each month when it is not necessary?  Then why would you allow a bank to charge you a $4 penalty each month when it is not necessary?  People work too hard to earn their money to then just let it be taken away without just cause.  It is YOUR money and you should spend it as YOU feel is best for you and your family.  Do not let the bank sell you some sad story about how they are not making as much as they used to make and they need you to bail them out.  That is not your responsibility as a customer.

• Know Your Options.  The banks want you to believe that "This is just the way it is."  This is just not true.  That may be the way it is at their bank, but that is not the way it is at every financial institution.  Do not be afraid of using smaller banks, small town banks or even credit unions.  Bigger is not always better, especially when the bank is the one getting bigger and better at your expense.

• Take Action.  If you allow the bank to penalize you unnecessarily it is no one's fault but your own.  I realize that changing banks is not the easiest task in the world.  We use direct deposit, online banking and online bill pay.  Changing banks is going to require some work on our part.  Doing what is right for me and my family is not always easy, but it is always right.  One other action step I would encourage you to take is to go through a solid financial planning workshop like Financial Peace University from Dave Ramsey.