Why We Hate Banks Part Deux

OK, so here's an addition to my 2/25/12 rant.  I criticize when criticism is warranted and whatever the opposite of criticism is when warranted.  In this case, it's not really 'kudos' but I don't know what it is.

The Regional bank I didn't name that charged for each iPhone processed deposit isn't the only bank in town.   The really huge bank with which we also do business, has an iPhone app which does check deposits.  Much to my surprise, this mega-Bank does not appear to charge for each transaction.   I'll believe it when I see my statement, but so far, there doesn't seem to be a fee for the "privilege." 

And this bank is way more evil than the Regional bank....  And famous for devising new fees...

Why We Hate Banks

So I decided the other day to try out an iPhone app for my bank, which would enable me to make a deposit into my account using the phone rather than traveling to a branch or ATM.   The bank had touted it as a time-saver, but I discovered a hitch half way through the process.

The app first had me take a photo of the front of the check and enter the amount of the deposit.  It was pretty much like using the iPhone to take any sort of photo; no big deal.  Then it was time to take a shot of the back of the check.   Those tasks completed, I was presented with a screen to either Cancel or Continue and oh, by the way, a notice that I would be charged $.50 to complete the deposit with the app.   

So my bank had found another fee based revenue source.  Why would I want to deposit a check for $10 and change via the iPhone and pay a $.50 fee?   Short answer: I would not.     I guess I shouldn't be surprised, since a couple decades ago, the banking industry offered free access to ATMs to get consumers used to the devices, and then tried to slap fees on when we used them.  Here the bank has the customer using his own equipment (iPhone) to process a deposit electronically into their system, and they think it's reasonable to charge me for the "privilege?"  But not to state up front that a fee would be incurred...

I think not.   A small example of why we hate our banks.

Banks and Profits

In this recent (12/16/10) story on Marketplace, we learned that the Federal Reserve is proposing to cap fees that banks can charge retailers for purchases made with debit cards.  In the current system, retailers are charged 2% per transaction for purchases we make with debit cards, with no limit on the fee.   If you buy something for $1, the fee is about 2 cents.   If you buy something for $100, the bank collects $2, and for a $500 purchase, the bank hauls in $10.  These fees are paid by the retailer, but the cost is undoubtedly factored into the prices the retailer charges customers.

The banking industry response (via Scott Talbot, chief lobbyist for an industry trade association) to the proposal is to threaten to make up the lost profits in other ways:

As the banks that are involved in the transaction are unable to recoup their costs for operating this service and allowing merchants to accept debit cards, we're worried that those costs will be shifted down to the consumers.
He says some debit cards may soon charge annual fees. Others may charge a fee for each debit card transaction.

So Mr. Talbot says that with a cap on the fees, banks will be "unable to recoup their costs."  Most of these transactions are electronic, so is Talbot implying that the transaction costs change for a $1 purchase vs. a $100 purchase?  If so, I'd love to hear more about how that works.  If not, and I suspect that it does not, Talbot and his banks can whine somewhere else about how they're going to continue to fund their multimillion dollar bonuses and unconscionable profits.  

Every few years, banks go through cycles in which they decide that the small balance accounts are not generating enough profit and those customers lose their free accounts.  These less profitable customers are simply forced out of the bank to find banking services elsewhere.  Threatening that banks will start raising other fees doesn't impress me.  They've already done that in response to the financial reform law last year.

Banks (mostly) have no loyalty to customers, so we customers will gladly take our business elsewhere when they start charging annual fees for debit cards.

A "Marketplace" Home Run

These days, I find myself getting more of my news from the American Public Media program Marketplace, on National Public Radio, than from anywhere else. The show is self-described as "a program which looks at the entire world through the lenses of business, economics and finance." It's not just about money. I pride myself for being a liberal arts major, and I think I managed to take just a single economics course in college way back when. Marketplace puts all those "business" topics into easily understood terms, even for liberal arts majors.

IMO, Marketplace hit a home run on Monday 6/29/09. The entire program was filled with worthwhile, and in some cases, uplifting stories. Even if you don't normally listen to this program, if you have any interest in history or what's going on around us these days, I urge you to either download the podcast or read the text of the stories for 6/29; it will be a half hour well-spent. The link for the show is here. The stories include:

• Victims of Madoff react to his sentence of 150 years in prison
• Toxic assets are still looming in the murk (and some banks don't want to sell them per the Fed plan)
• Fee hikes rise for debit cards
• Nigerian oil production disruptions due to rebel attacks (and why they're not affecting our gas prices very much)
  
• Fireworks shows and how many communities can't afford them this year (this is the uplifting one)
• Michael Lewis on the fall of Wall Street (the author mentions that government watchdogs still haven't actually spoken with the people at AIG who caused much of the chaos)
• Debt wasn't always the enemy (how the GI bill after WWII helped expand the middle class and home ownership in the US)

The article about fee hikes might cause some people to complain once again about those damn banks, but this one is a little different. Seems some folks over the years have treated debit cards less like checkbooks and more like credit cards. Since debit cards are linked directly to your checking account, you're not supposed to use it if you don't have the cash to cover it, and banks weren't supposed to let you use it if you lacked the cash. Seems the rules changed several years ago, and many banks now let you use the debit card even if you don't have the bucks to back up the transaction. Who woulda thunk?! Now, with looming limits on credit card interest, banks are imposing higher fees on those "overdraft" debit transactions. First thought: if you're nuts enough to not keep track of how much cash you have in your checking account, you deserve whatever fees the bank may impose on the privilege of overdrafting with a debit card. I don't have the same kind of sympathy for these people as I do for those being charged 20-30% interest on credit card debt.

The interview with Michael Lewis and what's still wrong with Wall Street includes the assertion that we still have not actually dealt with much of the underlying problem, and that there will be a "greater reckoning down the road" (i.e., more economic collapse before we're done with the Depression/Recession). One of Lewis' main observations is that when he went to interview people, like at AIG (the people who "actually know what happened") he's the first person they've talked to. That is, no one from Treasury or the NYS insurance regulators had "showed." He calls that amazing, I call it nonfeasance at best, and malfeasance at worst.

The 6/29/09 program is here. You can read the segments or listen to the podcast. Either way, these stories are eye-openers.