CNN caught up with Bank of America CEO Brian Moynihan and asked him why he wanted to charge his customers $60 a year for using their own money. He busted out the old rightto make a profit line:
Bank of America’s CEO defended his bank’s new $5 fee on debit cards on Wednesday, saying that customers and shareholders understand the bank has a “right to make a profit.” […]
“I have an inherent duty as a CEO of a publicly owned company to get a return for my shareholders,” Moynihan said.
Moynihan said that the bank will talk to its customers, teammates and shareholders and “they’ll understand what we’re doing — understand we have a right to make a profit.”
Just as Moynihan has the right to make a profit, his customers have a right to not be his customers anymore. Since the announcement of the debit card fee broke, this remains the biggest topic of discussion among my friends and acquaintances. I’ve been passed “Move Your Money” links and Credit Union finder websites on an almost constant stream. There’s a planned event for what amounts to a bank run on November 5, Guy Fawkes Day, a Move Your Money event for Bank of America. Moynihan, with his “fiduciary duty” hat on, doesn’t really understand the forces of nature he messed with here, I think. Maybe it won’t amount to much, but at the very least, I’d expect an erosion in the customer base.
Incidentally, the debit card fees do represent a theft.
The banks’ simplistic statements are merely an attempt to rationalize and obfuscate one of the largest illegal transfers of wealth from consumers to banks in American history.
Debit cards were developed by banks as a replacement for paper checks. When a consumer pays with a debit card instead of a check, the bank saves money. In the 1980s, Visa calculated the savings at 55 cents to $1.60 per check. The savings is much higher today. For decades, Bank of America, the founding owner and member of Visa (originally called BankAmericard) and all of the Visa and MasterCard banks, including Chase, hid the identity of their debit cards from stores by designing them to look and function like their signature authorized credit cards and by charging stores the same price for debit and credit transactions. Banks did this despite the fact that purchases made with a debit card didn’t involve a loan from the bank, posed very little fraud risk and were extravagantly profitable to banks because they eliminated the costs of processing and clearing checks.
The banks spend roughly 7 cents per debit card transaction. They get to charge up to 24 cents to the retailer, per the Federal Reserve, and now BofA tacks on $5 a month (which is just a prelude to becoming standard industry practice among big banks). And that’s profit ON TOP of the savings from not having to process checks.
The only way to stop this gouging is to get your money out of a big bank, and into a credit union or community bank free of such fees, as soon as possible. It’s called voting with your feet.