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The Bank Fees are Coming!

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[Disclosure: Shay Olivarria has worked closely with SCE Credit Union on various projects over several years.]

I’m sure by now you’ve heard the news that Wells Fargo debit card customers in Oregon, New Mexico, Georgia, Washington and Nevada will be charged a $3 monthly fee for using their debit cards beginning Oct. 14, 2011. The new fee is due a change in the ways that interchange fees are collected. If you’re not sure what an interchange fee is or why it matters, please keep reading.

Interchange fees are a small percentage of each transaction when you use your debit card. Someone has to pay to process that electronic swipe or hand-written signature and that costs money. The fee was $0.44 before the Federal Reserve ruling. The Fed wanted to lower it to $0.12, but after a lot of heated discussion from financial institutions the fee was lowered to $0.21 instead. The great part of this, for those of us that use credit unions, is that “financial institutions under $10 billion (like SCE FCU) are exempt” according to SCE Credit Union’s Chief Operating Officer, George Poitou. You probably don’t care what the fee is as long as you don’t have to pay it, and for those of you that choose to use large financial institutions, this is where it gets interesting.

Financial institutions are primed to lose about half of their revenue from interchange fees. A 2010 lawsuit made the yearly interchange fee revenue available and we’re talking about $20.5 billion annually. Don’t think for a second that financial institutions are just going to walk away from billions of dollars. Instead they have decided to recoup some of that revenue by charging customers to use their debit cards. In some markets JP Morgan Chase and SunTrust Banks Inc. have already initiated a monthly fee for debit cards. Now, Wells Fargo is joining the list. The $3 monthly fee will cost customers $36 a year.

It might seem like a small thing, but all those fees add up. Did I mention that the $3 fee does not include your monthly fee to use your account? That means you’ll get your usual monthly usage charge plus this charge if you use your debit card. It’s time to start thinking about why you use the financial institution that you do and if that institution is helping you leverage your money to build wealth.

Credit unions are not-for-profit financial institutions whose, “principal strategy is to offer members all the financial products and services they need at a fair price” says Poitou. That means that all the members of credit unions are part of a group that pools money together to make loans, via mortgage loans, car loans, credit cards, etc., and provide services, checking accounts, savings accounts, etc., to each other. Since the job of credit unions is not to make as much money as possible for shareholders, interest rates tend to be low and several credit unions have programs to help people with not-so-great credit or accounts on ChexSystems to get back on track. Every decision you make brings you one step closer to being wealthy or one step further away from being wealthy. Choose wisely.

Shay Olivarria is the most dynamic financial education speaker working today. She has written three books on personal finance, contributes to multiple online media platforms, and is a foster care alumni. She's been quoted on Bankrate.com, FoxBusiness.com, and The Credit Union Times, among others. Visit www.BiggerThanYourBlock.com to find out more about her work.

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