Banks Surrender on Debit Card Fees — For Now

Good news from the Wall Street Journal:

A month after Bank of America got pummeled by consumers and politicians for introducing plans for new debit-card fees, most other big U.S. banks are steering clear of imposing similar charges.

Following eight months of consumer testing, J.P. Morgan Chase & Co. has decided that it won’t charge customers who use their debit cards to make purchases….J.P. Morgan joins U.S. Bancorp, Citigroup Inc., PNC Financial Services Group Inc., KeyCorp and other large banks that have said in recent days that they won’t impose monthly fees on debit cards. None of those banks said they made their decisions because of the outcry over Bank of America’s fees.

Well, of course they didn’t say it. But I think we can all take a pretty good guess that Bank of America’s PR debacle had something to do with it.

BofA imposed its monthly debit card charge to make up for lower interchange fees mandated by Dodd-Frank, and that’s why other banks have been considering it too. But as far as I’m concerned, banks could have avoided this mess completely simply by allowing merchants to pass along interchange fees to their customers if they wanted to. That is, allow merchants to post a sign saying “2% surcharge on all debit card purchases” and see what happens. If merchants try it, but competition eventually forces them all to stop, that’s a convincing signal that interchange fees are a reasonable cost of business for having a reliable, risk-free payment system. If not, then not. But banks resolutely refused to allow this, which suggests very strongly that they knew perfectly well their fees were out of line and would get passed along to consumers in a free market. And having those fees passed along would have caused consumers to use their cards a lot less. So the last thing they wanted was transparent fees subject to normal market forces.

I don’t know how this is all going to turn out. It’s possible, of course, that banks will eventually figure out some other hidden or semi-hidden fee structure to replace the interchange fees. Obviously they’re going to try to make up their lost interchange fee revenue somewhere. But my hope is that as long as they’re forced to make it up with transparent fees of some kind, consumers will have a chance to react normally to those charges and market forces will then have a chance to exert some discipline on the banks — as they’re doing now with the monthly debit card fee. This will keep fees as low as possible and consumers will benefit. We’ll see.

$500,000 MATCHING GIFT

In 2014, before Donald Trump announced his run for president, we knew we had to do something different to address the fundamental challenge facing journalism: how hard-hitting reporting that can hold the powerful accountable can survive as the bottom falls out of the news business.

Being a nonprofit, we started planning The Moment for Mother Jones: A special campaign to raise $25 million for key investments to make Mother Jones the strongest watchdog it can be. Five years later, readers have stepped up and contributed an astonishing $23 million in gifts and future pledges. This is an incredible statement from the Mother Jones community in the face of the huge threats—both economic and political—against the free press.

Read more about The Moment and see what we've been able to accomplish thanks to readers' incredible generosity so far, and please join them today. Your gift will be matched dollar for dollar, up to $500,000 total, during this critical moment for journalism.

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate

We have a new comment system! We are now using Coral, from Vox Media, for comments on all new articles. We'd love your feedback.