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Banks in new fee schemes Americans are about to see red on bank debit card fees
Bank of America Corp. has stoked some controversy with plans to begin charging $5 a month for debit card purchases next year, though not at the ATM. Other big banks are in the process of testing a similar concept, or plan to, according to The Wall Street Journal.
The banks are scrambling to make up for lost revenue when new limits on swipe fees come into effect tomorrow, capping the amount banks charge retailers for customers swiping with debit cards. Those ceilings are expected to cost Bank of America, for example, $2-billion a year in lost revenue.
The issue's touchy, of course, given the era of bank bailouts.
Senator Dick Durbin of Illinois, who was instrumental in the caps, accused the bank of "sticking it to its customers," in a statement issued yesterday.
"Swipe fee regulation will still allow banks to cover the actual costs of debit transactions but will rein in the banks’ excessive profit-taking," he said.
"Small business and merchants will benefit from fee relief and consumers will benefit from lower prices. And banks that try to make up their excess profits off the backs of their customers will finally learn how a competitive market works.”
A Bank of America spokeswoman said the "economics" of offering debit cards have changed, given new regulations.
"Customers who don’t want to pay this fee can continue to access their checking accounts to get cash from ATMs, through online bill pay, and increasingly through their mobile phones, she said.
"We’ll notify customers in writing at least 30 days before we begin applying this fee.The fee will be waived for customers with certain premium accounts. In addition, In addition, Wealth Management/Merrill Lynch and US Trust clients will not be charged the fee."
A bad day, a bad quarter Say goodbye to one ugly quarter.
Stocks sank today and currencies were roiled as economic jitters again sapped the optimism of investors, closing out a third quarter many investors would like to forget.
The Canadian dollar slipped below 96 cents U.S., hitting its lowest level in about a year and closing down more than a penny at 95.40 cents. For a sense of the volatility, look at trading yesterday, when the currency was as high as 97.50 cents and as low as 96.13 cents.
Once the jitters fade, said Camilla Sutton and Eric Theoret of Scotia Capital, the loonie should regain some of its losses.
"There is increasing evidence that as the appetite for the [U.S. dollar] fades, there is pressure to find other alternatives," they said in a research note today. "... Canadian fundamentals fit the mold for a potential reserve currency well, however the capital markets fail miserably in terms of liquidity. Still, there has been anecdotal evidence that global central banks have interest in diversifying at least a minor portion of total reserves into [the Canadian dollar]
A softer currency, of course, can provide a bit of economic juice. David Watt, senior fixed income and currency strategist at RBC Dominion Securities, noted yesterday that the exchange rate acts as a "shock absorber." A shock to the system, particularly where global demand is concerned, will generally push commodity prices down and the U.S. greenback up.
"A weaker [Canadian dollar]would be the first line of defence of the Canadian economy from heightened global uncertainty," Mr. Watt said.
"In a perfect world, the currency adjusts to cushion the real economy. Other macro policy levers (fiscal and/or monetary) would be available as required and [Finance Minister Jim Flaherty]has pledged to be 'responsive, flexible and pragmatic.'"
In the stock markets, Tokyo's Nikkei closed down slightly, while Hong Kong's Hang Seng slipped 2.3 per cent. Stocks were then hammered in Europe, and North America followed suit, with the Dow Jones industrial average , the S&P 500 and Toronto's S&P/TSX composite all down.
Vincent Delisle, also of Scotia Capital, thinks it's overdone, and that while recession risks have heightened, the markets "may be overpricing this outcome." The gloomy headlines, he said today, don't correlate with the actual damage to the economy and corporate earnings.