Big banks have proclaimed rather loudly that they are being forced to do away with free checking allegedly because of lost revenue from debit card reform. But guess what? They did a survey and found plenty of free checking, and their own lobbyist, Nessa Feddis of the American Bankers Association, even said as much in a recent article: “… most people still pay nothing for the great service banks provide across multiple convenient channels.”
A 2010 survey conducted by the ABA, for example, shows that 53% of respondents did not pay anything for their checking account. Three years later, the same survey found that 55% of bank depositors do not pay for checking, which suggests that free checking has actually increased during the post reform era.
What’s more, additional studies released by moneyrates.com and bankrate.com show that the monthly service charges banks bill consumers are not even related to debit card swipe fees. Take, for instance, the fees banks levy on customers for checking accounts. Following debit reform in October 2011, these fees at the large banks went down and then rose slightly later. Fees today are about the same as they were before reform, demonstrating that the ebb and flow of the fees does not correlate with swipe fee changes but rather shows the independent market dynamics of consumer checking fees.
Long before the Durbin Amendment was enacted, debit card swipe fees were skyrocketing. In the last decade alone, they have tripled but there has been no corollary decrease in the fees banks impose on their customers. And as banks would cry us a river about how the lower cap fees are hurting their bottom line, we only need to look at the numbers again to see that their argument doesn’t hold any water. No bank that was impacted by the Durbin Amendment is currently facing anemic profit margins. In fact, it’s quite the opposite. Wells Fargo and other banks have recently reported huge earnings. And, MasterCard itself just posted a significant growth in profits during the second quarter, reporting that they are up 21% from a year ago.
The banks’ phony argument about free checking accounts is just another attempt to distract federal regulators and Congress from the real problem, which is their abuse of Main Street businesses and consumers in the debit and credit card marketplace. Debit reform was needed and now we need credit swipe fee reform or else consumers and merchants will continue to be squeezed while the banks rein in sizeable profits at our expense.
