Saturday, October 8, 2011

Pay by check!

When banks moved their customers from paper checks to debit cards, they saved a bundle; for example, VISA (founded by Bank of America) estimated that member banks saved more than a buck and a half per check when customers used a debit card instead.

I learned these and other interesting facts about the history of checks and debit cards from a recent article "Charging for Debit Cards is Robbery" written by Lloyd Constantine, the lead attorney in a successful 1996 anti-trust suit against Visa and MasterCard. This suit resulted in a big cut in the fees the banks charged retailers. However, customers were still being socked for a debit fee amounting to about 44 cents per transaction. Recently, acting through Dodd-Frank, the Fed determined that a more reasonable amount would be a quarter of that. Probably because of complaints from the banks, the fee was settled on at 22 - 24 cents per transaction. Compared with checks, this is a tremendous benefit to the banks, but compared to the amount of money they lost through their own greed, and compared to what they think they can get away with, it is not nearly enough.

Now, my next-to-least  favorite, Bank of America, wants to charge $5 a month when customers use its debit cards in retail stores. -- the ATMs would still be free if you use those from BoA.  This is their end run around the the Fed and Dodd-Frank. Nearly a century ago the courts decided that very similar fee that the banks charged for checks in retail sales was illegal. This should be illegal too, but so far there has not been a court case, and customers of BoA will be stuck paying that fee. Other big banks are likely to follow BoA's lead. Smaller banks may resist and thereby pick up some customers from the biggies. (BTW, I dislike CitiBank even more than BoA, but more about that some other time.)

What we should do if our bank socks us with this debit card fee is to pay by check. Yes, it may cost a dime a check, but for the $5.00 per month debit card fee you can write 50 -- yes 50! -- checks each month. If lots of BoA customers start doing this it will certainly catch BoA's attention, and send a warning signal to other banks. Stores won't like it, since it will slow down cash registers. But then maybe the stores will put some pressure on the banks and the Fed to roll back the debit card robbery.

There are two other points to note here. The first is that banks will charge whatever the traffic will bear; if the charges are illegal, they will collect them until it is proven so by a lawsuit. When one type of charge they levy is disallowed, they will institute another. However, successful lawsuits with big penalties can slow them down, and so can consumer actions like writing checks and changing banks.

The second point is that consumer protection laws like Dodd-Frank can help us fight against the greed of many financial institutions. That's why the big banks and financial houses, and their servants in the Republican party,  hate Dodd-Frank and other consumer protections, and want them removed or drastically weakened. It's all about money, and its flow from us (99%) to them (1%).

Spread the word: If you have a Bank of America account, start writing checks in stores instead of using your debit card, and consider changing banks.

(Thanks to Maxine B. for calling my attention to the Times article and for suggesting that we fight back by using checks instead of debit cards.)

1 comment:

  1. That's a really great idea! Using checks...I don't have BoA but I will spread the word to people who do.