BofA has 57 million consumer and small-business accounts. If a majority… (Mario Tama, Getty Images )
New federal debit card rules won't kick in until Saturday. But Bank of America wasted no time in announcing a $5 monthly fee for debit card purchases to make up for the expected drop in revenue.
The rules in question limit how much banks can charge to process debit card transactions. Those fees now average 44 cents per sale and are paid by merchants. After Saturday, banks won't be able to charge more than 21 cents.
The Federal Reserve has determined that this is a "reasonable and proportional" amount, reflecting how much it actually costs banks to process a debit card transaction.
For its part, BofA has estimated that these new rules will cost it about $2 billion annually in lost revenue. Industrywide, these processing fees brought in $19 billion for banks in 2009, according to the Nilson Report, which tracks card payments.
So here comes a $5 fee to use your debit card, effective early next year, whether you make one purchase a month or 100.
Anne Pace, a BofA spokeswoman, told me the new regulations have changed "the economics of offering a debit card."
She said customers rely on such services as fraud and overdraft protection, and those services can't be offered for free. "That convenience comes at a cost," Pace said.
But let's stop and think about this for a second. The Fed says 21 cents is a fair amount for banks to charge for processing debit card sales. BofA isn't saying it's going to lose money by charging this amount.
What it's actually saying is that it will make less money from debit cards by having to charge a reasonable rate. And apparently the bank just can't stomach having to tell shareholders that their pockets won't be bulging quite as much as before.
So it's slapping customers with a hefty fee — $60 a year — to keep the cash flowing in.
Do the math: BofA has 57 million consumer and small-business accounts. If a majority of them uses debit cards, we're talking a windfall of about $3 billion a year — or $1 billion more than BofA is currently making from transaction fees.
Meanwhile, Wells Fargo is set to begin testing a $3 monthly debit card fee in Georgia, New Mexico, Nevada, Oregon and Washington. Chase is experimenting with a similar fee in Wisconsin.
"We bailed out the banks, and now they want more money?" asked Susan Kirk, who receives her California unemployment benefits via a BofA debit card. "These people are just greedy."
At least Kirk and about 1 million other Californians receiving unemployment benefits through BofA debit cards can take solace that the new $5 fee won't affect them. The state Employment Development Department says the monthly fee won't apply to its beneficiaries.
The bank says it won't hit people with the fee for ATM transactions or if they don't use their debit card for purchases. It also won't shake you down if you have your mortgage at BofA or at least $20,000 in combined balances at the bank.
But many people will be unable to dodge the bullet. These are the people who don't have $20,000 extra sitting in the bank. These are the people who singed their fingers using credit cards and have prudently switched instead to debit cards.
These are the people who bought into banks' line that debit cards represent state-of-the-art convenience, and that this is a more efficient and eco-friendly way of accessing your money than using checks.
I asked BofA's Pace how much it really costs the bank to process a debit card transaction. She declined to answer.
I asked how much it costs the bank to provide fraud and overdraft protection. She declined to answer.
I simply asked how many debit card users the bank has. She declined to answer.
Nevertheless, Pace said that BofA is "trying to be clear and transparent with customers" about its fees.
The problem, of course, is that until BofA and other banks come clean on how much it really costs them to process plastic and provide related services, we have to take others' word for it. The Fed says 21 cents is a realistic fee for a debit card sale.
Some consumer advocates say the actual cost to banks, thanks to the huge volume of automated transactions processed daily, is closer to a penny or two.
In this light, that $5 monthly fee is pure gravy.
Put another way, BofA isn't just having its cake and eating it too. It's serving itself another piece.
David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to firstname.lastname@example.org.