Bank of America to charge monthly fee to debit card users - <AUTHOR> http://bucks.blogs.nytimes.com/2011/09/29/banks-adding-debit-card-fees/?hp <comment><USER2> 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.

<comment><USER3> 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.

<comment><USER4> 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).

<comment><USER5> 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.

<comment><USER4> 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!

</comment></comment></comment></comment></comment><comment><USER6> "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?

<comment><USER7> 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.

<comment><USER8> > 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?

<comment><USER9> Yes. Google walmart "moving pennies" and click on the first result

<comment><USER10> 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.

<comment><USER8> To be honest, I think he was making a joke about the HN post being its own reference, although I'm not too sure...

<comment><USER10> 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.

</comment></comment></comment></comment></comment></comment></comment><comment><USER11> 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?

<comment><USER12> 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.

<comment><USER13> 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.

<comment><USER14> _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?

<comment><USER13> 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.

</comment></comment></comment></comment></comment><comment><USER15> 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.

</comment><comment><USER16> 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.

<comment><USER17> I got the same notice. I will be using my regions account to draft checks to pay off my highest rewarding credit card now.

</comment></comment><comment><USER18> 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?

<comment><USER2> 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.

<comment><USER19> 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.

<comment><USER4> 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.

<comment><USER15> 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.

</comment></comment></comment></comment></comment><comment><USER20> 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.

<comment><USER21> 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.

<comment><USER22> 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.

<comment><USER20> 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.

</comment></comment></comment></comment><comment><USER23> Obi Wan Kenobi thought Mos Eisley was a wretched hive of scum and villainy, but he obviously never visited a commercial bank.

</comment><comment><USER24> 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.

<comment><USER25> 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.

<comment><USER24> 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.

</comment></comment></comment><comment><USER26> 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.

<comment><USER27> 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.

</comment></comment><comment><USER28> Just read in the article that the fed lowered maximum interchange fees. Has this translated to lower fees from payment processors for anyone?

<comment><USER29> 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.

</comment></comment><comment><USER30> 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?

<comment><USER31> 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.

<comment><USER32> 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 :).

</comment></comment></comment><comment><USER33> 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.

<comment><USER13> 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.

<comment><USER33> Good to know!

</comment></comment></comment><comment><USER34> 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.

</comment><comment><USER35> Goodbye worst company in the US. Hello Credit Union!

</comment><comment><USER36> Time for the great BofA exodus of 2012...

<comment><USER37> 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.

</comment></comment><comment><USER38> Its anyway the banks fu __ __g the customer. Either directly or indirectly using merchants.

</comment><comment><USER32> No one seems to be adding: in a desperate attempt to avoid bankruptcy

</comment><comment><USER39> Queue Bank Simple Invites.... now!

</comment><comment><USER40> 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?

</comment><comment><USER41> Good thing we bailed these guys out...</comment>