FORTUNE — Now that the nation’s biggest banks have backed off on plans to charge those pesky debit card fees, consumers may think they won a small victory. But there isn’t much reason to celebrate.
Earlier this week, Bank of America (BAC) cancelled plans to levy a $5 monthly charge when customers use their debit cards for purchase. After the bank announced the fee last month, customers revolted, flooding the Internet and bank branches with complaints. BofA abandoned the debit card fee idea Tuesday, after competitors Wells Fargo (WFC) and JP Morgan Chase (JPM) backed away on similar plans.
This might sound like a win for the little guys against what Occupy Wall Street-ers would call the “evil banks,” but customers aren’t really winners here.
They’ve lost in two ways: For one, forget about hope that banks will be more transparent about hidden fees. The new debit card charges were – if only indirectly – a reaction against a new federal rule halving the amount banks can levy on merchants each time consumers swipe their debit cards to make purchases. Banks argue the law would essentially cost them billions in revenue and, in turn, made plans to tap into customers’ wallets to make up those fees before the new provision went into effect on Oct.1.
Ironically enough, the rule is part of the broader Dodd-Frank financial reform law. There are many objectives in the law, but one of its memorable precepts centers on the notion of “transparency.” Now risky derivatives aren’t exactly debit cards, but the big banks were at least trying to be transparent about the new fees. Not to say making customers pay for using their debit cards is justified, but it’s worth noting that the banks tacked on an entirely new charge rather than subtly raise existing fees.
So now this is where consumers lose again. It’s likely that banks will eventually fill the hole in revenue. But given the vile reaction from consumers, the banks will probably take a less direct (and arguably secretive – at least by perception) approach to additional fees. For instance,
There are other fees to watch out for:
Can’t find your bank’s ATM? Pay higher fees
As irritating as those ATM fees are, banks could find new revenue by hiking fees charged to those scurrying for cash and unable to find their own bank’s ATM. It’s easy see why they would take this route, since any hikes would probably go unnoticed — after all, we’re already used to paying those fees. And even if the increase irks consumers, it’s not likely going to cause mass defections, since most of us already use the bank with most convenient ATM access.
Writing a check could come at a price
As options to pay online flourish, the checkbook is no longer as mighty as it used to be. Up until three years ago there were more checks written than electronic transactions, says Joe Gillen, chief executive at Pinnacle Financial Strategies, a Houston, TX-based bank consultancy. With that shift, banks might likely start charging customers on the off-chance they turn to their checkbooks, Gillen says. What’s more, banks could raise fees for expedited payments. TD Bank (TD) instituted a new $9 fee for savings account transfers and hiked four existing fees it charges customers, including certified checks and money orders.
Raise merchant fees on cash and check deposit
Dodd-Frank limited the amount banks could charge merchants every time consumers paid with their debit cards. And those costs were eventually passed onto customers as businesses raised prices to offset the fees. Banks might return to this strategy by raising fees charged to corporations and merchants for processing check and cash deposits. So, in effect, banks would essentially be back to their old ways before Congress passed the landmark legislation.
Consumers may feel they won a battle, but the war is not over. The banks will probably find some way to make up for their lost revenue. The question for the angry consumer base is whether they might rather not know they’re paying more for services. Perhaps ignorance is really bliss?
