With the debit card fee debacle now in full swing, with not only Bank of America but also Wells Fargo and Chase jumping on the let’s-charge-customers-more bandwagon, credit unions have been capitalizing on disaffected customers who are fed up with paying more and more for the same pitiful level of service.
Bank of America has announced a $5 per month debit card fee, with Chase and Wells Fargo hoping to woo customers with their “only” $3 per month fee for the same service. Many credit unions (and for that matter, many banks) offer checking accounts with debit cards with no fees, and have been working to entice customers away from the ever-increasing difficulty that has become bank account ownership.
Over the course of the last few decades, the value of investing money in a bank account has dwindled, to the point that many banks pay an interest rate below the pace of inflation, making bank investments barely any better than keeping one’s cash in a coffee can under the bed. And with a variety of fees, either for service or for overdrafts and so on, the value is even less. On top of this, many banks (and credit unions as well) have figured out better and better ways to get customers to overdraft their account, sometimes specifically targeting the poor, who are several orders of magnitude more likely to fall into this trap than the wealthy.
Tricks such as delaying deposits by an extra day, while processing transactions and other purchases immediately, result in a great deal more overdraft fees than would otherwise occur, and profit-motivated banks capitalized on this trend as much as possible.
The real reason for the debit card fee, however, is the recent war over swipe fees, which generated some of the biggest lobbying donations all year; the final victory was rather mixed, but certainly a step in the direction of favoring merchants. Previously, banks were allowed to charge up to 44 cents per debit card transaction, a cost which was absorbed by the business or the customer, whether in the form of extra fees or higher prices on goods and services. Now the swipe fee is limited to a bit over 20 cents, depending on the size of the transaction, and since this represents a multi-billion dollar shortfall on the part of the banks, they are trying to figure out new ways to drain it from customers, and it has taken the form of debit card fees.
Credit unions, understandably, have been experiencing some of the biggest membership applications in their history, representing what could become a mammoth shift in consumer behaviors, as they have become increasingly distrustful of big banks, whose combination of reckless investments, predatory lending practices, bailout requests, yet continued bonuses and high executive salary have alienated their clients.
Such practices are likely to become the main marketing tactic of credit unions, who, though not the perfect savior of the industry, are non-profit by nature and less likely to participate in such behavior. BECU, the largest credit union in the state of Washington, has experienced tens of thousands of membership applications in recent months, and those customers, if well satisfied, are likely to stick around for a long, long time.
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