Banks’ recent imposition of monthly debit card fees has been one of the issues cited by Occupy Wall Street protesters, but what did these people expect? After Congress imposed restrictions on the “swipe fees” that banks charge merchants every time one of their customers buys something with a debit card, the banks had to find some other way to maintain their profit margins.
The idea of getting something for nothing appeals to every consumer, and even if it sometimes seems to happen, in reality it rarely does. Consumers who were happily swiping their debit cards without having to pony up to banks were probably doing so to merchants without realizing it, since the banks were charging those merchants an average of 44 cents per transaction. They, in turn, were probably passing the hit along to their customers, just like they do their myriad other costs of doing business — rent, utilities, advertising, taxes, etc.
Now that Congress has limited the “swipe” fee to roughly 24 cents, the merchants are getting a small break. Whether they use it to become more aggressive with their pricing or simply use it to fatten their bottom lines remains to be seen. Not that consumers will be able to tell. Still, they might want to stop and think — maybe even thank their congressman — the next time they shop a sale that seems too good to be true.
What they shouldn’t do is badger their banks — at least not over this. They’re businesses, like any other, trying to make a profit. When a government regulation restricts their ability to do so in one way, they can’t be blamed for trying another. If Congress regulated debit card fees, banks would probably start charging credit card customers higher interest rates or giving their premium customers smaller “rewards.” Or they’d raise the minimum deposit for free checking. Any of these measures would enrage a different class of customer while boosting the banks’ bottom lines. But if J.P Morgan’s third-quarter results, released Thursday, are any indication, those haven’t been very robust lately.
The point is, the market — not the government — should decide what fees banks should charge. If enraged customers stopped using debit cards (as some say they will), the banks would either cut those fees or raise others — unless they calculated that they could do without as much debit card business. It should be up to them to decide how they want to run their businesses, and up to consumers to decide whether they want to patronize them. Debit cards, after all, aren’t the only way to shop.