Debit cards were always a dubious value proposition for consumers.
Hey, use this new piece of plastic instead of checks or credit cards! It gives us – err, we mean you – instant access to the money in your checking account. This way you can lose the interest-earning float on your money!
Now their value has become even ... um, more dubious? Dubiouser?
Did we mention we’re going to hit you up for $3 a month for this piece of plastic?
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That’s the plan of Wells Fargo, which will test-drive a $3 monthly fee on new debit-card accounts starting in mid-October. Washington is one of five lucky states to be selected for this experiment.
It has long been one of the favorite paranoid conspiracy theories of your business columnist that the banking industry will not rest until it has achieved this nirvana: The ability to charge you for depositing your money, for storing your money and for withdrawing or spending your money.
Banks have had intermittent success with the latter two. Checking account maintenance fees were standard until competition from upstarts and outsiders began nibbling away at them. Not many consumers will put up with the idea of a credit card that comes with an annual fee attached.
But the quest for revenue is never-ending – especially when the basic business of buying (paying interest on deposits) and selling (making loans and collecting interest) money has been so dreadful. Banks are flush with depositor cash, but to hear them tell the tale, there are few loans to be made.
To that add the coming restrictions on the fees that people don’t see but which they pay just the same – the “swipe” fee (and what an interesting double entendre that term represents) charged to merchants. The current average, according to CreditCards.com, is about 44 cents per transaction; the new federal cap is 21 cents. Credit card fees, by contrast, weren’t capped.
Thus banks looking to recapture the revenue they’re going to lose from the cap will turn to other sources – such as a fee on debit cards.
Would that be enough to make Americans give up debit cards and revert to credit cards – or to such archaic payment methods as checks or cash?
Banks will be watching the outcome of Wells Fargo’s test intensely. Consumer inertia is an underestimated force. “I’m so mad that I’m thinking about changing banks. Someday. When I get around to it.”
If inertia over escalating fees to spend one’s own money proves more powerful than the annoyance factor and insult to frugality, and spending behavior doesn’t change, you can expect those fees to proliferate.
And it will get banks to think about what other possibilities for fee production are out there. Such as, perhaps, charging to take in and store your money?
Which is what BNY Mellon is planning to do, according to a recent Wall Street Journal report.
True, the storage fee applies to amounts over $50 million, a sum most consumers are unlikely to have parked in their passbook account. But again, if one bank makes it work then others will consider it, and if it’s $50 million today, it might be $5 million tomorrow, and maybe the day after tomorrow banks will drop a few, or a lot, of those pesky zeros in determining a threshold at which deposit-maintenance fees kick in.
Financial literacy instruction used to warn of the danger and cost of home-deposit schemes such as stuffing money under a mattress. The security issue is still there. But now consumers are going to have to decide if they’d prefer to lose sleep over the lumps of cash stored under their own bed – or the money it’s costing them to stash it under the bank’s.
Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at firstname.lastname@example.org.