Today, all over the news, is the story of a new pilot program Bank of America is instituting; Charging all of their customers who use their debit cards for transactions 5$ per month. Not a big fee for many, 5$ can't even buy a pizza anymore (after tax) but this means a heck of a lot of money when you consider that this one bank holds 12.2% of all US deposits, covering about 80% of the US banking population. Source: http://en.wikipedia.org/wiki/Bank_of_America .
Some of the largest companies that reside in the US set trends for others, Bank of America has grown to be the largest holding company in the US so its not a stretch to say that they influence the industry heavily. If they create a policy change, other banks listen in on their opportunity moves. This means that the institution of a 5$ fee on every account they hold will be likely to permeate many other banks, if not all, soon as a common industry practice.
No why should anyone be up in arms over new banking fees? Its simple; Banks were created originally to ensure a safe place to keep money, they generated interest on accounts as encouragement for customers to use them. They carefully loaned money to those same clients to finance purchases of land, cattle, business ventures, and personal property which earned them more interest than they paid out to account holders. These types of banking fees turn the traditional model of banking upside down. Now middle and lower income customers are likely paying to keep their money in banks, and getting loaned the same money at increasing rates.
If you asked anyone from 20 to 30 years ago if they expected banking to get to a point where you'd be charged more interest than your account paid just to gain access to your money, they'd probably laugh at you. Now a sense of apathy is common when large companies completely change the terms of their contracts with us as consumers. Contracts are the foundation of ethical business, they are what secures business agreements, and ensures successful completion of projects when money is involved. The concept of contracts that secure business seems to be lost on individual consumers when doing business with big business. Companies frequently use binding and well defined contracts in dealing with each other, and they sue each other when those agreements are broken. Why then, is it increasingly so, that contracts between individuals and companies are often written vaguely, and in disappearing ink? How can a company dramatically change their terms with a client whenever they feel like doing so? Because they retain lawyers well versed in "escape clauses".
If I run a grass cutting business, charging 60$ per yard with the right to change pricing at any time, and for any reason, why should I even require contracts as a basis of doing business? They prevent my price from going to 180$ before your bill comes in, that's why! This way, a client can choose when they want their grass cut and when they don't want to spend the money, possibly in winter, when grass does not tend to grow. But Banking is a little different. You cannot decide exactly when and when not to pay fees for doing business, because you have to physically move your money to change banks, and notifying a customer, and giving them a chance to "opt in" is also an essential right to unscheduled cost increases.
Years ago, my original bank was a small bank called "Equitable", long before the days of Wal-Mart and Bank of America, I actually earned .03% interest on that account back then, around 1989. This was before ATM cards, people wrote on these things made out of paper called checks. My bank was bought out by a company called Nations Bank later on. I thought nothing of it because they assured me that all of the rules and benefits that my prior bank account promised me would be carried over, and nothing would change, except my bank's name. The truth is, I had a contract with Equitable, and not Nations Bank. Rules on my account DID change, and many of them behind the scenes. I thought nothing of this, because even though the interest they paid me was shrinking rapidly, to the point of a meaningless trickle, I always held out thinking that "At least they'd never charge me to hold my money!". Boy, was I wrong! This all changed dramatically when Nations Bank became Bank of America. All bets for not paying to deposit my money were off, and worse yet, from starting my original bank account with Equitable, where I was promised a "charge free" and "interest-bearing" bank account, those contractual obligations have been arbitrarily changed, and I never signed a single document authorizing these changes to happen. They have been bending the rules. I shouldn't have to call a company to complain over something so rudimentary and intuitive, there are government agencies to prevent these types of transgressions, but nothing is being done.
In 1999 I mortgaged a house with Bank of America, and started a credit card based on the stellar account history I had with them. They gladly signed me up for interest loans ranging from 6 to 10%, earning my bank well over 14,000$ per year (in interest) on loans they made to me. Meanwhile I made a grand total of 3$ (probably less) in year-to-date interest on both my savings and checking accounts during the same year; I was far from being rich at the time; but 3$ earned in one year on my bank account!? That can't even buy a wallet. I could have made more money with scratch-off lottery tickets... What does this mean? It doesn't mean that I got "shafted", my investments were sound, but it meant that the bank was making KILLER profit on my money, and not passing any of the profit back to depositors, who are giving them the very money they lent out, and for years. This used to be the number one "business balance factor" for the banking industry; To only lend based on their tendered deposits. That kept interest rates on loans low, and made banks value individual customer service more. It also kept banks from alienating customers with bogus fees. This 5$ monthly fee on debit card use is a bogus fee. Its emerged out of a bank that is so big, it knows that customers have little choice in the matter, and instead of providing real value for its depositors, this shows a move of Bank of America to turn its depositors into paying customers. One could maybe infer that this change of attitude for banking and investments led to the housing meltdown, and led to widening financial division class-wise. Its obvious who is most impacted by the difference in interest payouts and interest lending; the poor and middle classes, your grandparents, and people who don't know any better.
The main ideal I have a problem with is that a company can start an agreement with a customer, making all kinds of contractual promises about benefits and features, and then subtly change this agreement for their sole benefit over time through escape clauses. This is something that undermines the very fabric of trustworthiness in business. We see open-ended contracts on the rise with everything from Cell Phone Carriers to Social Media Sites. With open ended contracts, companies can change terms thereby invalidating any statement they make to sell a product. Of course people don't read contracts, but why read them if they're subject to change at any time? Where will we be in 20 more years? Will we have to pay 500$ before using a credit card with 50$ on it? Will we be paying higher taxes and then a credit card swipe fee for every purchase at the supermarket? In cases of this, a customer loses, while the company is so large, they fail to see any significance in their customers as an individual. This is why I generally favor small business. Its much more accountable, because they need their customer base to survive. Greed only works on a large or monopolistic scale, by making sure you support smaller businesses, you ensure your rights won't get trampled (at least until big-business buys your small bank out!).
Lets hope bank transaction charges like this don't continue to "catch on" as a common practice. Fostering honest competition without PRICE FIXING is one of the best ways to ensure that this doesn't happen. Otherwise, I'm going back to keeping money under my mattress, at least there it won't generate any fees and it will generate lots of "lint-erest"! (sorry for that one).
