Customers remain fat targets
Published 12:01 am Thursday, July 7, 2011
With their federal bailouts, imaginative consumer fees, and intrusive marketing practices, big banks make a good case for credit unions, and only paying with cash.
The “convenience” of free checking accounts, ATMs, debit and credit cards has been oversold. Anything once used to lure customers is being used against them in the form of fees. The new crop of fees coming customers’ way is a direct result of the federal government correcting other practices deemed unfair to consumers and retailers.
Since last year, banks can no longer automatically charge customers for debit-card and ATM overdraft protection — cardholders must opt in. With the automatic protection, a person’s charge goes through, even if there is no money in the account. Banks then charged customers around $35 for each overdraft. (Often processing the highest amount first, resulting in more overdraft fees. Faced with lawsuits, most banks have abandoned the practice, although Wells Fargo, Chase and Bank of America still process checks that way, the Los Angeles Times reported.)
Retailers understandably balked at banks’ processing fees — averaging 44 cents for every swipe of a debit card. Last week, the Federal Reserve capped the fees at 21 to 24 cents per transaction, rather than the 12 cents originally proposed, the New York Times reported, pleasing neither retailers or bankers.
Last year, banks collected more than $50 billion from merchant fees and overdrafts, the Los Angeles Times reported. With the new rules, they stand to lose more than $10 billion a year in merchant fees and more than $6 billion in overdraft fees.
Hence the “need” for new fees.
But banks have sold us on the fanciful idea that it’s more expensive for banks to manage electronic payment systems, justifying the fee for retailers who take debit and credit cards.
In fact, electronic debits are much less expensive to process than checks or cash, Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, told the Los Angeles Times. Banks have saved billions in operating costs, Mierzwinski said, and have kept the savings to themselves.
To top it off, banks are now engaged in that trendy and privacy-sapping practice of selling information about their customers’ shopping habits to retailers: How much they spend, where they shop and what they buy, the New York Times reported. In turn, retailers use the data to offer targeted discounts via text messaging, email and online bank statements. Each time a consumer goes for a deal, the retailer pays the bank a commission.
With individual information so darn valuable, perhaps the consumer also deserves a commission.
