Consumers who are up in arms about the Bank of America announcement over $5 per month debit card fees should brace themselves for similar news from all the major banks, warns Bob Hammer, founder and CEO of the card industry advisory firm R.K. Hammer. For the first time, fee revenue from payment cards (including debit, credit and prepaid cards) will exceed interest revenue in 2011.
“Bank of America is just the piñata of the week,” says Hammer. “All the major banks are going to be doing this, or something like it,” he warns.
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Data released by R.K. Hammer shows that in 2011, card issuers will earn more revenue from fees than from interest, due to what he calls “card revenue engineering,” a process of “making what are necessary changes to pricing structures in order to offset (partially) the economic and financial model shifts brought on by such new regulation/legislation.”
8-Year Historic Trend in Revenue Split from the R.K. Hammer Model(s)
|Year||Interest Income %||Fee Income %|
Hammer says the rise in fee revenue is a “predictable” outcome of changes brought on by the CARD Act, the Wall Street Reform Act, and other consumer protection legislation. He says bank and card fees will continue to rise, including “new fees we haven’t heard of yet.”
Bank of America’s new debit card fee will bring in an estimated $1 billion, he says. “That’s about half of what Durbin cost them,” he says, referring to the Durbin Amendment that was part of the Wall Street Reform Act.
At the same time, Hammer says, “Consumers are going to get a lot sharper and a lot smarter about where to put their money in order to get the best return on their money. ” He recommends shopping around for the best bank account, whether it’s with a local, regional or online bank, or a credit union.
That’s easier said than done, though. Two recent studies highlighted how difficult it can be to get, much less, compare checking account disclosures from banks.
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Image: Céline Aussourd, via Flickr.com