Bank Fees? Depends on your side of the Coin

The current economic state has yielded us many interesting headlines from record corporate profits, debt debates, protesting and some old fashion mud slinging between political figures and presidential hopefuls. One topic that I have found as most interesting is debit card and banking fees. As if the financial sector didn’t have enough bad press, the news of banks charging fees for debit cards and checking accounts took the media by storm. Protesters on Wall St. were outraged, as the simple $5 a month fee would deprive them of one morning of Starbucks coffee a month. Those who lost their wealth in the financial downturn were shocked; how could the same companies that destroyed their wealth now take more from them?

Normally, it is pretty common for a business to charge to use their service. We all pay financial advisers to manage our assets; they receive a commission based off of performance. Maintenance companies charge to cut your grass, they don’t do it to get a tan. Fitness centers charge you to use their weights, machines and trainers, not because they enjoy people walking around in sweaty t-shirts. Wouldn’t it make sense to pay a bank $5 a month to ensure the safety of your hard earned cash? Or would you rather keep it under your bed and not have it guaranteed at all? Maybe banks these days are down right greedy….

Just like a coin, there are 2 sides to every story. Most people fail to recognize the recent Dodd-Frank laws that went into effect, one of which was written and orchestrated by Illinois Senator Dick Durbin (don’t worry everyone, nobody knows all of the laws in Dodd-Frank, as there are approximately 225, and they are still being rewritten and worked on 2 years later). Many people just considered the banking industry to be selfish in a stagnant economy. The so-called “Durbin Rule” restricts the fee that banks charge retailers for credit card usage at their locations. To give some background on the fees, they were normally set between the retailer and the bank, at some agreed upon price (free-market principles in action here). With Senator Durbin instituting a limit on these transactions, these banks were forced to find ways make up for the lost revenue stream. Essentially, our politicians engaged in price fixing (illegal for businesses), in hope that the business would pass cost savings to the consumer. Since then, I have yet to see any prices drop, but I do see costs passed on the consumer in the banking world…. Oops?

Recent news of these banks deciding against these fees has brought much relief to the public. Bank of America and Wells Fargo have both come out and said they will not enact this monthly fee. In a recent article on Yahoo! Finance, Senator Durbin told reporters “I hope the banking industry learns from this”. Something tells me they will learn as much from this as being slapped on the wrist for nearly collapsing the economy and walking away with hundreds of billions of dollars of taxpayer money. One Wall Street protester said, “This is what the movement would consider a very, very small first step on rectifying an oppressive dynamic between the financial services industry and the 99 percent”. Of course we need to thank the protesters, as a few people standing outside a business’ building has much more say than thousands of people holding millions in deposits, threatening to give them to your competitor if continue your current state of business.

What should we take away from this? Just like everyone else, I will not forgive the banking world for 2008-2009, and the damage done because of it. But before we kick the child that is down and throw salt in the wounds, lets take a step back. As much as we despise “ Too Big to Fail “ and the other flaws of our banks (which is another topic in itself), lets remember who funds our housing, cars, education, property, business (you see where I’m going). As much as we may hate it, when banks are strong, and credit is good, business generally do very well, and last I checked, that is what this country needs.

Here is the link for the Yahoo Article:

http://finance.yahoo.com/news/Bank-of-America-drops-5-debit-rb-2224200831.html?x=0