By Anthony W. Hager Bank of America (BAC) has rescinded its plan to charge customers a $5 monthly debit-card fee. Shall we praise bank regulators for their swift action in preventing the exorbitant charge? Well, no. Then we'll credit politicians for legislating against greedy, big-bank profiteering, right? Wrong again. The free market drove BAC to drop the debit-card fee.
Several banks have floated similar debit-card fees — some already assess the monthly charge — and each met the same fate as BAC. Customers informed their financial institutions that they would rather pull their assets than pay the fee. Banks responded in predictable fashion. Banks need customers in order to remain solvent; therefore they heed their customers' complaints and outrage, whether or not they are reasonable. That's the free market in action. Unpopular fees and programs are abandoned just as surely as profits are taken. Everything depends on what the market will bear.
The $5 debit-card charge was never a product of free-market capitalism. It was the result of political machinations, most notably on the part of Senator Dick Durbin. Durbin's amendment to the Dodd-Frank bank reform legislation placed an arbitrary cap on debit-card interchange fees, which banks impose on retailers for each swipe of a customer's card.
Banks collect this fee to maintain their electronic networks, retailers distribute the fee among their customers, and customers enjoy the convenience of cashless transactions… (Read more)
Source: Mises.org
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