There was news yesterday that JP Morgan Chase was going to decline any debit card transaction above $100 in response to a Fed ruling that would reduce the fee they receive per debit card swipe from the retailer from $0.44 to $0.12. While this certainly would cost them up to $1 billion per year, I find that this news story is simply a distraction from what they (and the rest of the big banks) do to their customers every day.
To prove to you that banks have been monkey-holing us for years (yes, monkey hole. It’s a technical term), I have decided to run the unabridged version of an editorial that originally ran in the Indianapolis Business Journal in December of 2010. Enjoy. It has an extra dose of snarky.
Dear Banking Industry,
I am very disappointed in you. You have long been the backbone of our society. You have provided us the financial resources that we have needed to build our businesses and our homes. Our financial successes used to be linked. This is no longer the case.
Oddly enough, my disappointment has very little to do with the recent foreclosure crisis. While “robo-signing” up to 8000 foreclosures per day is arguably deplorable, I’m more concerned about how you treat your average customer on a daily basis. This is not a rambling complaint that offers you no direction. In fact, I have a very profitable solution for you.
But first things first. I believe in free markets. I believe in capitalism. I also believe that you have the right to pay your employees whatever you wish to pay them. I don’t believe their compensation is any of our business. Continue to pay them whatever you like.
However, I also believe that banks have a responsibility to their depositors first and their shareholders second. For it is our money that you borrow to loan out to others.
At various points last summer, you were forced to change your practices based on major changes to credit card rules and overdraft fees. As you know, legislation created to protect consumers, contributed to a $7.65 billion 3rd quarter loss for Bank of America alone. You have been forced to change based on government regulation, but unfortunately the direction of change that you choose has the been the wrong one. You continue to hide fees and encourage irresponsible spending, all while touting your “free” checking accounts.
So I simply ask of you this: please charge us all monthly fees for our checking accounts. Because as my high school economics teacher told me: there is no such thing as a free lunch. Yes, I realize that you make money on our checking account deposits because you invest and loan it out just like our savings account deposits. Therefore you are able to offer us “free” checking in exchange for the use of our money. In essence, you have been exchanging your “free” banking services for the use our checking deposits. I agree with you though, this isn’t a fair trade. Your services are worth more than your access to our checking deposits.
Charge us for checking accounts. You provide a great service for your customers. You facilitate our purchases, and help us settle our financial obligations. For this, you should be handsomely compensated. Seriously. Most people would gladly pay you monthly checking account fee if they knew that it meant you would stop hiding and creating ridiculous streams of revenue (many of which, they have no clue about.) In return for this reliable, renewable, and consistent income stream you must agree to the following demands.
1. Stop charging consumers for balance inquiries. The thought of being charged to check on the money that I’m letting you hold for me is ridiculous.
2. Stop inducing wild and impulsive spending. Many checking accounts are provided without fees these days as long as the customer uses the debit card associated with the account a minimum number of times per month. Why would you induce your customer to spend money? How does inducing our spending help us as we try to improve our financial lives?
3. Don’t charge people for savings accounts. It takes very little infrastructure to maintain a savings account. And that is why banks have rarely charged for them in the past. In addition, technology has made the cost of hosting savings accounts even less for you. Thus your insistence on charging Americans for letting YOU borrow THEIR money is simply gross. This isn’t a complaint about the interest being credited to depositors. This is a complaint about not being our true financial partner. Many of you only charge fees if the account falls below a certain arbitrary balance, but people with balances that fall below your arbitrary levels are disincentivized to save by these fees.
4. Stop charging minors for checking and savings accounts. Charging a child to save money is flat out wrong. They don’t use your bank services, they simple are trying to accumulate money for the future.
5. Stop marketing irresponsible acts as convenience. Your advertisements that feature people sending you a text message to obtain their balance prior to making a major purchase is insulting. If someone doesn’t know if they have enough money to make a purchase, should they really be making a purchase? These technologies of convenience aren’t financial tools, they are spending tools.
The most important point is this: these changes that I’m suggesting should not be a result of regulation. Forcing you to change based on further regulation would be a mistake. The regulations that you have already been subject to have led to this new “creative” fee structure. I’m asking you to stop tricking us with fees – simply because it’s the right thing to do. Don’t bleed us slowly while trying to convince us that your banking services are free. Just be honest and charge us for checking accounts.
Which brings me to my final point: small banks and credit unions still have a chance to thrive. And your insistence on continuing your poor business practices will hopefully lead to their success in the future. The more that people realize that you aren’t acting as their financial partner, the more business small banks will earn. This is because they know their customers names. They have less branch employee turnover. And most importantly they are forced to live in the same communities as their customers, and must be able to look their customers in the eye.
I’m asking for honesty and cooperation. Be our partners again. Re-engage in our lives by honoring your depositors, not your shareholders.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.