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| 12 cents ain't gonna cut it...expect unexpected fees |
From the Columbia Journalism Review:
The Wall Street Journal does a good job today on how banks are plotting new fees to get around the clampdown on their old ones, which included abuses like the overdraft racket and interchange-fee gouging that made them tens of billions of super-high-margin money a year.
The Wall Street Journal does a good job today on how banks are plotting new fees to get around the clampdown on their old ones, which included abuses like the overdraft racket and interchange-fee gouging that made them tens of billions of super-high-margin money a year.
The biggest eye-raiser here is that the banks are talking about charging an annual fee on your debit card now:
To counter that lost revenue, banks are thinking about imposing annual fees of $25 or $30 on debit cards, according to people familiar with bank strategies. Some also considering limiting the number of debit-card transactions that a customer can make each month, these people said. Another idea circulating in the industry: Limiting the size of a purchase that a customer could make with a debit card. At the same time, reward programs for debit cards are likely to get the ax, these people say.
Axing rewards programs, of course, is perfectly fine. But it’s unclear why limiting the size and number of debit transactions would be a money-saver for the banks. Are they trying to drive people back to paper checks, which cost much more to process?
But imposing annual fees to use a debit card is a different story. Over the last two decades, the banks have intentionally driven their customers toward debit. Initially that was because it cost them much less to process than paper checks. Then they found out theycould gouge retailers and consumers because of the monopoly setup of the payment system.
Here’s how The New York Times last year described how that system came about:
Fees were not an issue when debit cards first gained traction in the 1980s. The small networks that operated automated teller machines, like STAR, Pulse, MAC and NYCE, issued debit cards that required a PIN. MasterCard had its own PIN debit network, called Maestro.
Merchants were not charged a fee for accepting PIN debit cards, and sometimes they even got a small payment because it saved banks the cost of processing a paper check.That changed after Visa entered the debit market. In the 1990s, Visa promoted a debit card that let consumers access their checking account on the same network that processed its credit cards, which required a signature.To persuade the banks to issue more of its debit cards, Visa charged merchants for these transactions and passed the money to the issuing banks.
Citi Adds $60 Annual Fee to Many Cards – Watch Your Mailbox
If you have a credit card from Citibank, keep an eye on your mailbox because Citi has recently implemented a $60 annual fee for many of their cards. Citibank – the same too-big-to-fail monstrosity – the same company that accepted taxpayer bailout money and subsequently jacked up interest rates across the board – yeah, that company. Not content with the cash they’ve already wrung from the taxpayers, they have now tacked on this $60 fee to many cards that previously had no annual fee. However, Citi will generously refund the $60 if you spend $2,400 per year on the card. Wow, thanks for nothing, Citi.Thanks to a reader named Bill for pointing this out to me. Several different cards are apparently affected, including:
- Citi AT&T Universal Card
- Citi Diamond Preferred Rewards Mastercard
- Citi Dividend World Mastercard
- Citi Dividend AMEX Card
- Citi Drivers Edge Card
- Citi Home Rebate Mastercard
- Citi mtvU Student Card
- Citi Platinum Select Mastercard
