
Bank of America to charge monthly fee to debit card users - rdamico
http://bucks.blogs.nytimes.com/2011/09/29/banks-adding-debit-card-fees/?hp
======
untog
I think the thing that really annoys me about these kind of moves is that
they're clearly targeting the less fortunate out there. If I want to avoid the
$5 that's easy- I'll just switch to my credit card. But people who don't have
enough credit to get a credit card now get punished twice.

I read a fascinating passage in The Big Short (an excellent book on the
financial crisis by Michael Lewis) that told the story of a top banking exec
boasting about the amount of money they made on "Free Checking" accounts. Far
more than they made on the accounts they charged for, because the "free"
accounts came with dozens of catches and fines that ended up costing the
customer more.

What a foul way of doing business.

~~~
bilbo0s
There is actually something more fundamentally troubling about this new fee
...

it drives Americans to use more credit.

It was pointed out to me recently that this tendency towards credit that is
really 'built-in' to the rules in our society, would probably end up doing us
in one day. Sometimes you don't even think about it. I recall once, shortly
after the onset of the financial unpleasantness that began in 2008, I was at
an airport trying to rent a car. I thought, "Hey...I'd better start practicing
what I preach!" So I whipped out a simple debit card, with more money behind
it than the value of the car I was renting. "Nope...we don't accept
debit...only credit". I thought, "That's a little strange...no wonder the
financial system is taking a crap." I didn't have a lot of time, so I just did
the credit card thing.

Point is, there are a large number of places out there that will not allow you
to do business with them unless you are willing to go into debt, for however
brief a period of time. When you consider the size of the US and the number of
transactions being made every day...that's a little concerning.

~~~
pyre
One difference between debit and credit is when they do things like authorize
payments, but then never actually capture them. When it comes to debit cards,
some banks will pull that money out of your account, and not release it until
may be 10 days after the authorize expires. On the other hand, these things
can happen instantly (or within a day) on a credit card. Some people are
rather annoyed when they do something like book a hotel room on a debit card,
but then pay on their credit card when they checkout. The authorized amount
disappears from their account for ~14 days and they think that they were
charged twice (because their bank isn't necessarily transparent about this).

~~~
electromagnetic
I know the standard when I've stayed at hotels that do accept cash (AKA Debit)
they wan't $100 or more as collateral, I assume to avoid the whole problem you
just described.

However, what I didn't know, which I soon realised was that the hotels pre-
authorization hits like $500 on a room I pay $50 for a night. I found this out
when I'd just moved country, had zero-credit, had a single $1000 visa card and
was planning on putting a weekend away with my wife on credit so I'd have two
pay checks in before I had to fork out the cash.

The worst was when we booked a campsite out of season. It cost us $14 a night
and they required booking by credit card. They had $500 pre-authorized for
over two weeks until we'd stayed, and I paid them cash. It's absolutely
absurd.

Thankfully since the hotel incident we've always kept a burner credit card for
things like this. I don't get the logic behind extending someone credit and
then allowing it to be held-up in pre-authorization that will never get
processed for the full amount when the credit could be spent at a restaurant
or something.

~~~
pyre
Authorizing an amount, but never capturing it ('capture' is the industry term
IIRC) is a hack on the system so far as I'm concerned.

1) I've gotten security calls from banks before just because some gas stations
were authorizing the card for $100 prior to capturing for the actual amount of
the gas. It even took the person on the phone a while to tease out that it was
a $100 auth and not a $100 purchase.

2) The hotels a authorizing for a large amount because they want to make sure
that you can pay for damage. They don't care if it goes on your credit. They
get their money, then payment just becomes a matter between you and your
credit card company. Note that not all hotels will authorize for $500.

    
    
      > I don't get the logic behind extending someone credit and
      > then allowing it to be held-up in pre-authorization that
      > will never get processed for the full amount
    

Technically, the full amount _can_ be captured until the authorization expires
or they capture for a smaller amount. _That_ is why. They don't want you to
max out the card, and then have a $500 capture that they weren't expecting.
Oops! You're $1500 in debt now on a credit card with a limit of $1000!

------
seanalltogether
"The formula sets the cap at 21 cents, plus .05 percent of the transaction
amount, plus another penny in certain cases, for fraud-control measures."

I understand that running to the government for solutions is rarely a good
thing, but in this case, shouldn't "digital currency transactions" be
something that the federal government maintains as a free utility to society?
Isn't something like this just as important as printing currency?

~~~
patio11
So you know cash has processing fees associated with it, right? Really.
They're totally orthogonal to the cost of physically creating paper or metal
currency, and they're mostly subsidized by merchants. Cash management is a
hard problem. WalMart spends about 3 million every year moving pennies around
-- that actual coin type. Every time a salon owner has to spend time driving
to the bank or money leaves a cash register, that's just another cost incurred
because the merchant accepted cash money as a payment type.

Checks _also_ have processing fees associated with them. They're mostly
subsidized by banks.

Credit cards have processing fees, paid for mostly by merchants.

Merchants really want banks to subsidize their use of debit cards, like banks
subsidize their use of checks.

There is no such thing as free, there's just free-from-the-perspective-of-
your-own-P&L-statement.

~~~
ramchip
> WalMart spends about 3 million every year moving pennies around -- that
> actual coin type

I tried googling the data but I didn't find it. Is there a reference for that?

~~~
patrickc
Yes. Google walmart "moving pennies" and click on the first result

~~~
laaph
Please don't use google as a reference. Please, when you want to make a
reference, use anything else.

The first two results are to hacker news (this page!) and after that the
results are to pages about penny stocks.

[http://www.google.dk/search?q=walmart%20%22moving%20pennies%...](http://www.google.dk/search?q=walmart%20%22moving%20pennies%22)

I know my google-fu is worthless but I can at least follow directions, and it
still comes up with nothing.

~~~
ramchip
To be honest, I think he was making a joke about the HN post being its own
reference, although I'm not too sure...

~~~
laaph
I was trying to illustrate that telling someone to google for references when
they already indicated that it was unsuccessful, is not likely to be
successful.

------
natesm
Well, I'm switching (I don't have a credit card). What is a good alternative?
I know everyone loves USAA, but none of my family has any relation to the
military. BoA is "great" because it is _everywhere_ , is there actually
anything as wide spread in the (northeast) US?

~~~
Lewisham
I really like Ally. I was a little hesitant about them based on their GM past,
but now I've switched I'd never go back to a brick and mortar.

People always ask me the same questions: Q: How do I get money out if there
are no ATMs? A: I use any ATM, Ally refunds the fee, so even those sleazy but
oh-so-convienent ATMs are great.

Q: What if there's a problem? A: When is the last time you saw your bank
manager? I never spoke to mine at BofA. Whenever I had anything more than a
trifling issue, the teller directed me to call the BofA phoneline anyway. I
may as well endrun the whole hassle and talk directly to Ally (who also have
very quick wait times).

The only thing Ally doesn't do yet is scanning checks. I haven't got a
physical check for a while now, but if I do, I put it into my BofA account
(which is otherwise entirely dormant) and have Ally debit it out.

~~~
jcampbell1
If you have high balances, you should consider "bank of internet". The name
sounds like a joke, but they are similar to Ally in terms of services, but
offer money market rates on the checking account. I use them, and don't need a
savings/money market account, so it really simplifies things.

They also don't charge foreign exchange fees, and their method for computing
atm fees is the amount mod $5. When I was living in china, I actually made
money every time I withdrew from the ATM, because the USD amount would be $83,
and I would get $3 refund for non-existant ATM fees.

~~~
nitrogen
_amount mod $5_

How does that work at ATMs that only give out $20s? n _20 mod 5 is always
zero. Unless, of course, "amount" here refers to the withdrawal amount_ plus*
the ATM owner's fee?

~~~
jcampbell1
Yes. The bank doesn't actually know what the ATM fees are. They just see cash
withdrawal for 102. Some ATMs send two transactions, but many just bundle it
as one transaction.

------
InclinedPlane
I've had accounts at Bank of America for the better part of a decade, due to
my employer they have been completely free. Just recently BofA sent me a
letter detailing all the new monthly charges for my accounts, to the tune of
an effective annual fee of $372. The irony is that I never use those accounts
anymore, having switched to a vastly superior local credit union about a year
and a half ago. Despite having pumped six figures in deposits through them
more than once over the course of having them as a bank BofA never treated me
any better than if I were some junkie or drug dealer, it was a breath of fresh
air to move to a bank that didn't treat me as if I were nothing more than a
cow to be milked for fees.

------
rednaught
They are not alone. I got word from one of my banks, Regions, that they too
are implementing a similar charge.

Bank Simple...we're ready for you now.

~~~
mattezell
I got the same notice. I will be using my regions account to draft checks to
pay off my highest rewarding credit card now.

------
navyrain
I fail to see why anyone selects a big bank like BofA/WellsFargo/Chase for
their personal accounts, when they are known to have a plethora of fees and
dubious ethics, and there are almost always better options in regional credit
unions. What am I missing?

~~~
untog
ATM locations, mostly. Chase has an ATM on every street corner in NYC (OK, an
exaggeration, but only just). I know plenty of credit unions refund a certain
number of ATM fees, but you can't do thinks like check deposits at them any
more.

~~~
cpeterso
Some banks and credit unions are adding "online checking depositing": you
upload a photo of the check to their website. They OCR the photo and process
the check. No signature endorsement necessary.

Also, a good way to avoid ATM fees is to get "cash back" when using a debit
card at the grocery store.

~~~
pyre
Might not be the case anymore, but I remember hearing in the late 90's that
some banks would charge you fees for getting "cash back" with your debit card
at a merchant. This is probably bank-dependent though.

~~~
InclinedPlane
There's nothing special about getting "cash back" from a grocery store, there
aren't any special fees associated with it. You're just buying cash from the
store, it would be no different than if it had a stack of individually
barcoded $20 bills on the shelf that they charged $20 each for.

------
illumin8
What is truly ridiculous is that banks get a 3% merchant fee for every credit
or debit transaction charged to their card. So, essentially, they are charging
their customers for the very privilege of making money...

And we wonder why the banks are failing... this is why! You don't charge your
customers for the privilege of making money! I told my bank that I flat out
refuse to use my debit card unless THEY PAY ME at least 1% of the merchant
fee, seeing as they are getting 3%.

Right now, I use a Fidelity Retirement Rewards Amex card for all of my
purchases. I get 2% cash back on every purchase. For those merchants that
don't accept Amex I use a Fidelity Retirement Rewards Visa, which pays 1.5%
cash back on every purchase. I encourage everyone I know to do the same.

The reality is that credit/debit card companies make a ridiculous amount of
money in merchant fees (up to 3%). DEMAND that they share that profit with
you.

~~~
baddox
Is that true for debit transactions? I always thought that credit card
purchases cost the retailer money, which went to the credit company and/or
rewards programs and/or banks, but that debit transactions cost the retailer
nothing but cost the bank.

~~~
kgermino
Debit transactions do cost the merchants, just not nearly as much. I think
it's on the order of a transaction fee + .5% for debit vs transaction fee
+3-4% for credit.

~~~
illumin8
Right, they are still making money off of every transaction. It seems
ridiculous to discourage debit card use. They are just greedy and want to
charge both customers and merchants for essentially being a middle man and
adding little value to the transaction.

------
RexRollman
Obi Wan Kenobi thought Mos Eisley was a wretched hive of scum and villainy,
but he obviously never visited a commercial bank.

------
nhangen
BankSimple is rejoicing right now.

I have a mortgage and 3 separate accounts with BoA, but they still treat me
like a 2nd class customer. This could push me over the edge.

~~~
mahyarm
It really depends on the branch/employee. I've dealt with idiots, and really
great retail bankers at BoA. The stanford mall branch is pretty good in Palo
Alto.

~~~
nhangen
I rarely go to the branch offices because it takes an hour to get through the
line. Most of my experience is with over the phone help.

------
codecaine
fun fact: In Germany it's exactly the other way round at least for 99% of the
banks. You will get a free debit card at every bank but you have to put down a
considerable amount of money as prepayment for a credit card additionally to
the yearly fees. If you want a Deutsche Bank credit card they will lock 1000
EUR before they issue it to you and you will pay around 60-100 EUR yearly.

~~~
merijnv
I think this holds for significant parts of the non-US world. In the
Netherlands (and for that matter any European country I've visited) credit
cards seem extremely uncommon. I am one of two people in my circle of
acquaintances who owns a credit card and I only use it for buying stuff on-
line (when no other option is available).

As I understand it you can also only get money from an ATM associated with
your bank, making picking a bank an availability issue too. Here you can get
money from an ATM not associated with your bank once every 24 hours, making
ATM availability pretty much a non-issue.

------
learc83
Just read in the article that the fed lowered maximum interchange fees. Has
this translated to lower fees from payment processors for anyone?

~~~
dangrossman
It will for me since my account is priced in terms of "interchange + x%".
Whenever interchange changes so do my fees. From what I've read so far, this
will actually lead to an increase in my fees beginning in October, not a
decrease. Visa will raise the interchange to the new maximum federally allowed
value for some card types where they were previously charging less than this.

------
Jarred
Maybe it's because I don't buy much stuff, but I never understood the point of
using credit for small purchases like getting a cup of coffee. I don't
understand why people would use cash for that either (unless the coffee shop
only takes cash/ charges more for debit). The same goes for checks.

Could someone explain it to me?

~~~
ghaff
I don't use debit. Pay off the credit every month. Get rewards points for it.
Just no reason to use an additional separate card.

~~~
Rickasaurus
I have two cash reward cards and use one until I max out the points (%2) and
switch to the other for the rest of the year. It's like a free $300 bucks a
year :).

------
PStamatiou
Don't they already do this? If I don't have at least $1500 in my account each
month I get charged. So I have this account I never use anymore save for some
tiny charges, that I don't want to cancel due to credit score that has to have
that much money in it at all times.

~~~
jcampbell1
A checking account doesn't affect your credit score. If you have a line of
credit (e.g. overdraft protection), that would be reported, but I can't
imagine that would affect your credit score much as the limit on personal
lines of credit are small (typically around $500).

Cancel the account if you are not using it.

~~~
PStamatiou
Good to know!

------
erreon
I think BOFA and other major banks are hand feeding people to credit unions in
droves. I went today and set up my account at RBFCU and I can't wait to get
far away from BOFA. Both my parents and I were with them for 20+ years.

------
SODaniel
Goodbye worst company in the US. Hello Credit Union!

------
poppysan
Time for the great BofA exodus of 2012...

~~~
sixtofour
They may lose a small but noticeable number of customers, but they'll gain
those numbers back over time. Consumers are mostly frogs in gradually warming
water, the difference being that many of us "frogs" don't have easy options
for switching pots.

------
rshm
Its anyway the banks fu __ __g the customer. Either directly or indirectly
using merchants.

------
Rickasaurus
No one seems to be adding: in a desperate attempt to avoid bankruptcy

------
binaryorganic
Queue Bank Simple Invites.... now!

------
Yevgeny
Banking has now officially become synonymous with desperation and lack of
creativity. What was once saved for accountants in the backroom has splurged
into the face of consumers. Once the "idea well" of ingenious ways to earn an
extra-buck or two dries out big banks look to corporate tax-breaks. But what
happens when supplementary hidden fees and costs just don't cut it?
Apparently, this. Interestingly enough, BOA announced these plans with the
concurrent release of "_% cash back on all debit card
purchases"...coincidence?

------
maeon3
Good thing we bailed these guys out...

