As regulation curtailing financial institutions from levying certain charges on consumers has mounted over the past year, banks have had to dream up new fees to replace those now trimmed by laws. Credit-card users have experienced new inactivity fees and foreign-exchange charges, while checking accounts have gotten hit with new monthly maintenance fees.
Banks are considering additional fees on credit cards and checking accounts. But they also are looking at new ways to make money on cash machines and especially debit cards as regulators pinch the cards’ conventional revenue streams.
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.
Debit cards are just one of several banking products that will carry additional fees this year. People familiar with their thinking say several banks are considering raising fees on automated-teller machines for noncustomers, which currently average $1.63 a transaction. Banks have long griped about such transactions, saying that providing cash to noncustomers isn’t a priority for them.
Banks also are continuing to add fees to checking accounts, a trend that began last year. Next month, for example, customers of the former Washington Mutual will see their free checking accounts replaced by fee-based accounts from J.P. Morgan Chase & Co., which bought WaMu in 2008. Customers can avoid the fees if they meet certain criteria such as maintaining balances.
“We don’t want to raise fees on our customers, but unfortunately, regulation is forcing us to do it, and as a result, some customers may end up unbanked,” said a Chase spokeswoman. Bank industry executives have said the new regulations will squeeze low-income customers out of traditional banking, sending them to high-fee alternatives like check cashers and payday lenders.
I hasten to add, of course, that it isn’t just “bank industry executives” who say that these new regulations will squeeze low-income customers out of traditional banking.
A number of people emailed me after my WSJ column yesterday asking whether it is accurate to even continue to refer to these market responses as “unintended consequences” when the results of price controls and other regulations are so utterly inevitable, foreseeable, and predictable. All I’ll say about that is that if Senator Durbin and others want to force people to pay more to have a checking account and use a debit card and would prefer that more people get pushed out of the mainstream financial system and into payday lenders and check-cashers, then so be it. But can the architects of these policies at least admit that’s the cost of what they are doing, rather than simply assuming that they can somehow repeal the laws of economics and wish away unintended consequences?