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Banks Have a Right to Make a Profit; Customers Have the Right of Choice

by Ryan Guina

Bank of America has been receiving a lot of bad press lately, primarily from the recent announcement that they would begin charging  customers a $5 per month debit card fee starting early next year. The new fees are in response to the Dodd-Frank financial reform bill, which limits the processing fee banks can charge stores for each transaction. The bill slashes the fee from $0.44 per transaction to $0.21 per transaction, or a greater than 50% cut.

This is an industry wide change, and BoA isn’t the only bank adding new fees or slashing benefits. Major banks such as Chase and Wells Fargo have similar debit card fees, though at a lower monthly rate, and Citibank recently announced fee increases for the Citibank Checking Account, though these are waived when customers meet certain criteria (which are surprisingly easy to meet), such as a minimum amount of deposits held in Citi accounts, or by making a certain number of electronic transactions, such as direct deposit or online bill pay.

Many companies are also slashing benefits, such as debit rewards cards. I bank with USAA, and they recently closed their debit rewards program as a result of these changes. But the way they handled the change was much different than some of the banks making headlines. How so? They communicated the need for the change to their members by sending them a letter which explained the new laws, explained how it would impact USAA, and told members that eliminating the debit rewards program was not ideal, but it would help the bank maintain free checking and savings accounts, free ATM reimbursements, and other member benefits. Communication is key when you are running a business, just ask Reed Hastings, the Co-Founder and CEO, Netflix.

Bank of America CEO: We Have a “Right to Make a Profit”

Bank of America "Right to make a profit"

Bank of America has the right to make a profit; you have the right of choice

Bank of America’s CEO, Brian Moynihan, should have taken notes when Reed Hastings announced he made mistakes in handling the Netflix subscription price increases. Instead, he ignored customer sentiment and stated his bank has the “right to make a profit.”

It’s true – banks, and every other business for that matter, are in business to make money. But when you are as popular as Netflix, or when you are the largest bank in the US, you need to be cognizant of how your statements come across. Netflix customers were outraged when the price hikes were announced, just as Bank of America customers are outraged with the debit card announcement.

Reed Hastings could have softened the blow and made a lot more friends if he would have announced the real reason for the price increases – it wasn’t because Netflix was trying to gouge customers. The price increases happened because Netflix was forced to astronomically increase their expenditures for streaming content. And the content providers wanted a piece of every customer, regardless of whether or not they consumed streaming content. The end result was Netflix splitting the company into two parts: Netflix, which will be streaming only, and Qwikster, which will be a mail order only subscription. Hastings could have, and should have, done a better job explaining this.

And this brings us back to banks. USAA handled the effects of the Dodd-Frank financial reform bill well. They communicated the effects of the bill to their customers and announced there would be cut backs. Customers may not have been happy, but they at least understood the situation, and they didn’t feel as though they were one in a long number of people who were there to meet a bank’s “right to make a profit.”

Customers have a “Right to Find a Better Bank”

I’m not out to bash Bank of America. I banked with them in the past and later left for USAA, which offered more conveniences and better fit my needs. I also know several people who currently bank with Bank of America, and are quite happy. I am also not calling for you to boycott bank of America, or leave for another bank.

But I am suggesting that you examine your options. Just like Netflix customers were forced to review Netflix service, Bank of America customers need to reexamine whether or not BoA meets their needs. Will you be able to meet Bank of America’s requirements for a Premium Account, which avoids debit card fees? If so, then this may not matter to you. If not, then I would encourage you to explore your options. Why pay a bank $60 per year for something you can get free elsewhere?

I encourage you to explore your options and find the bank which meets your needs, and won’t nickel or dime you with fees. I use USAA, which is an incredible bank. And there are a variety of fee free online savings accounts, free checking accounts, and hundreds of credit unions which don’t charge as many fees as some of the larger banks.

Don’t forget to look for perks:

Banks have the right to make a profit. And consumers have the right to find a better option. Take charge of your financial situation and find the best bank for your needs.


Published or updated October 6, 2011.
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{ 2 comments… read them below or add one }

1 Krantcents

You are right! Everyone has a right to make a profit and you can leave the bank. I would see if there is a way to remain and not pay the fee. I have a premium account where I do not pay the fee, however I do not use a debit card anyway.

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2 Ron

The Dodd-Frank bill pretty much sealed the fate that we are now experiencing, shifting revenue from one stream to another. In this case, the consumer is hit with higher fees, less benefits, etc. Given the turmoil that many banks were already facing with bad mortgages, this was just bound to happen. They do have the business right to profit, and the changes came at a bad time.

I think Citi has the best approach here, in my opinion. The way they adjusted fee structures, and avoided debit card fees show thought was given to satisfy a range of customers. BoA will end up upsetting people that are sensitive to fees, or at the lower end of financial spectrum. Citi essentially gave the lower tier a means to avoid additional fees, while increasing fees on higher tier accounts where account holders are more likely to absorb the fees without too much problem.

Different banking philosophies. I’m guessing BoA suffers a loss of good will from the community given their stance and highest fees announced yet (that I’m aware of). Citi shines here.

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