I'm Mad About Bank of America and Citibank's New Fees: PerkStreet's COO Spouts Off

05 Oct 2011

The Author

Chief Operating Officer

Jason is a serial entrepreneur with a long history in financial services. He began his career making boxes in the shipping department of Deluxe Check Printers over 15 years ago. He’s come a long way since then, helping both public and private companies to build products that better meet the needs of their customers and to discover the digital world. Most recently he helped a large public company overhaul its strategy to offer multiple financial products tailored to the needs of students.

Jason believes deeply in the power of high technology to improve people’s lives. He has participated in high-tech start-ups as an advisor (of companies building everything from mobile phone apps to travel advice), an investor (as Managing Director at Rock Maple Ventures), and an executive (as the Chief Operating Officer of US Genomics). For Jason, PerkStreet’s ability to use technology to reinvent banking and rewards is what really gets him jazzed. Jason has a degree from Harvard University and is a frequent speaker on the subjects of innovation and customer-centric organizations. When not working from a coffee shop, Jason can be found doing just about anything active outdoors.

Photo by Bryce Vickmark Photography

I’m Mad About Bank of America and Citibank’s New Fees: PerkStreet’s COO Spouts Off

Jason Henrichs 29 Comments

The new fees introduced by Bank of America and Citibank this week make me mad. Real mad.

I’m not a customer. In fact, their assault on the American people is great for PerkStreet’s business. But it still makes my blood boil. I’ve seen lives changed when people stop spending on credit and choose debit.

Honest Americans have tried to move away from credit card debt during the recession — revolving debt from credit cards has dropped from a trillion dollars in 2008 to just 800 billion in the U.S. It’s a drop of 20%. Good folks are fighting back, as Americans are wont to do.

If you’re using debit instead of credit, you are probably looking to get ahead of your bills by spending in a way that offers more control — and therefore the assurance you won’t spend more than you want or can afford to pay. Debit card fees are nothing more than corporate hands dipping into the pockets of honest people. These new fees are at best a tax on people looking to pursue the American dream of getting ahead through hard work, and at worst a slight of hand that destroys rather than creates wealth.

I’ve spent my career in and around financial services since my first job at the largest manufacturer of checks in the early ‘90s. I’ve worked for and consulted to lenders, investors, asset managers, insurance companies and deposit institutions. I can tell you with absolute certainty that financial institutions do not put their own profits at risk. Don’t be fooled into thinking that’s what this is about.

Charging for debit card transactions does two things: it taxes those who choose to use debit cards, which offer the most control over money and keep consumers on budget; and it puts those who switch to credit cards at risk of falling into debt (even if they fully intend to pay it off every month).

Trust me, Big Banks charging for debit card usage know they’ll earn more from customers every year than the sum of the fees. Why? Because over half of the credit card-carrying American population failed to pay their credit cards in full and carried a balance resulting in interest in the last 12 months. That means at least 1 in every 2 new credit card customers who migrate away from debit will likely end up paying credit card interest. Powerful behavioral psychology is at play when you use a credit card that makes it easy to spend more and get in trouble — and the banks know it.

Aren’t the Big Banks afraid of the customer backlash, the potential of rioting and angry tweets and Facebook posts?

Nope. They know the other members of the Evil Empire will follow suit — watch for more announcements to be made. Big Banks think the American people won’t realize they have a choice. Quietly paying the fees, not thinking there is an alternative.

Guess what Big Banks? America is waking up to the idea that you were able to get the people to own the risk while you owned the profit, which spurred on this financial crisis. And guess what else? They are waking up to the fact that alternatives do exist.

I’m proud to be building such an alternative and I’m thrilled that PerkStreet Financial is a refuge for Americans looking for a way of banking that rewards responsibility. I’m not against companies making a profit, just those that do it without ethical impulse. I’m glad there are a few other ‘good guys’ out there too.

If PerkStreet isn’t right for you because you like brick-and-mortar banking, check out a credit union or regional bank that has fee-free checking and no crazy terms to meet. Whatever you do, don’t stick with a bank that is taking money from the hands of real people to line their own pockets and destroying our country in the process.

What do you think about Big Banking’s new fees? How do you view debit cards in contrast with credit cards? Now it’s your turn to spout off in the comments below.

Photo: Ben Walther

Jason Henrichs 29 Comments

http://www.facebook.com/sunk818 Sun W Kim

We cancelled our BofA and Wells Fargo accounts. We signed up for PerkStreet. Please set us up right away.
davido84

You’re blaming the messenger and not the source. The source is Congress, specifically the Durban amendment, which is a textbook case of crony capitalism at its finest:

1. Big Box retailers like Wal-Mart and Home Depot decide that the merchant fees that banks charge them are too high. They could save a lot of money with a government price control on these fees.

2. Big Box retailers lobby congress for price control legislation on their merchant fees.

3. Senator Durban is quite happy to oblige, no doubt Home Depot and Wal-Mart are generous contributors to Durban’s campaign.

4. Banks warn that if the Durban amendment is passed, they will pass on the fees that they can no longer charge merchants like Wal-Mart to consumers.

5. Congress passes the Durban amendment anyway, because Big Box retailers have much more lobbying influence than consumers.

6. Banks, who are no longer able to charge War-Mart, simply pass the fee on to consumers.

It’s amazing that anyone is surprised about this. Debit card processing costs money, and if Congress does not allow the banks to collect this from Wal-Mart, they will find a way to collected it from consumers. BofA wasn’t smart, and made the fee obvious. Most banks will simply add a few dollars here and there to their other consumer fees, so they won’t be so obvious about it.
http://www.facebook.com/sunk818 Sun W Kim

Sorry, but the source is the bank. You can’t blame Congress for responding to years of complaints from merchants about processing fees that are way beyond pass-through costs.
davido84

As we learned during the depression, price controls don’t work. Why didn’t Congress simply mandate that banks could not charge any consumer fees, for anything, ever? Wouldn’t that solve our problems?

I seriously doubt that Perkstreet thinks that Senator Durbin and Congress understand the Perkstreet business model well enough to decide what fees they should be allowed and not allowed to charge.

I love Perkstreet, but even they have to charge fees. They just happen to be fees that I can avoid. I pay $10 for a lost debit card from Perkstreet, and no fee for a lost debit card from my credit union. Perkstreet will charge an inactivity fee if I don’t have any transactions, but my credit union will not. On the other hand, my credit union does not give me cash back on my debit card purchases.

If you don’t like paying BofA debit card fees, the solution is, wait for it!@5d7b90483d9062cfdb674339ed515f55:disqus
– don’t bank at BofA. That’s why I’ll be closing my BofA account.

I know everyone hates the big banks, but I don’t think BofA wanted to do this. If they had, they would have done it a long time ago.

Congress simply shifted the cost of Debit Card processing from Big Box retailers like Home Depot to consumers who choose to remain customers of the big banks. Why Congress considered it more important for Wal-mart to save money than for consumers is a mystery. Or maybe not.
NG

I understand that perkstreet has their hands full in rolling out their mobile apps and a savings account, but at the same time i feel that Perkstreet should also be getting more aggressive in their marketing and getting their name out there to the people who are just frustrated by the Big Banks.
http://www.facebook.com/sunk818 Sun W Kim

Congress did not “shift the cost”. Don’t confuse profit margin with cost. The cost to process debit cards are mere pennies per transaction. The law removes a revenue stream. What a bank decides to do with a loss of a revenue channel is up to them.

It is not really clear yet whether consumers will lose with this new law. We’ll have to see what retailers that receive this new processing rate will do for their customers, if anything. Like you see with cash & credit pricing at gas stations, it is possible more retailers will offer further discounts with the use of a debit card.
Kl

Big banks should PAY US back for the bailout!
Dmatthews35

I think the big banks are charging to use debit because the obummer administration told them they had to limit what they could charge businesses. Blame that administration!
Robertgcormier@gmail.com

Perhaps the current cost of processing a transaction is now pennies but what about the costs to build the network? How about the costs to secure the networks? How about the costs of fraud prevention? If someone hacks your card do you assume the responsibility of your fraudulent charges? I bet not. You probably expect the banks to assume this very large indeterminate liability. Why are we begrudging profit? America is a capitalistic society. Free markets have proven to be the most efficient over time. Congress DID SHIFT the costs from the retailers to the banks which have chosen to pass onto the consumers. Anyone with half a brain knew this would happen as a consequence of the new legislation. Fear not though. We still have the freedom to choose our banks. However, given the government creep into the free markets who knows how long these freedoms will last. Careful what you wish for.

I was in a cab today and we drove by the “occupy” protest. I gave them a big thumbs down. The cabbie and I struck up a conversation. He was 69 from the Ukraine. He related a story that when he was young his family got on a waiting list to buy a phone. Guess how long they waited? Wait for it…..15 YEARS!!! That is not a typo.

Free markets work. Don’t give me the crap about Wall Street as an example of free markets. Congress pressured Fannie Mae and Freddy Mac to lower lending standards to raise the home ownership rates. How many homeowners LIED on their applications. They should be held accountable for their fraudulent actions. How many crooked mortgage brokers falsified apps and were complicit with homeowners who should not have been purchasing in the first place? What about the Nationally Recognized Statistical Ratings Agencies that slapped AAA on piles of crap “aka” subprime mortgages. These ratings agencies were government blessed and protected monopoly/duopoly who were paid to rate debt issues by the those banks issuing the debt. Can you say conflict of interest? Wall Street simply made the capital available. Those who bought this debt were supposedly “sophisticated” investors. Yet now they cry fowl and sue wanting their money back saying they were duped. Will those same investors pay back the profits earned from the very same issuers they are now selling? What ever happened to buyer beware? Econ 101. Jeez!!! We are becoming such a nanny state and a bunch of whiners. Success does not come easy. Why do we begrudge success?

Our leadership gets mad at the banks for not currently making enough loans to businesses. These are the same banks we are mad at for providing TOO MUCH capital during the mortgage boom. Make up your mind.

If you want to improve the system improve shareholder rights. Mandate the separation of Chairman and CEO roles. Give shareholders more input into compensation decisions Make markets freer and empower consumers with more choice. Why can’t we shop across state lines for health insurance? Seriously?

I could go on. Bottom-line is the banks are charging these fees to recoup costs. These banks invested billions and continue to invest billions in technology and security. The result is secure mobile banking and other great conveniences we now take for granted. This stuff isn’t free. It costs money to build. R&D, operation, servicing, advertising etc.

If you want to get mad – get mad at Walmart and Home Depot for lobbying and interfering with the free markets. Why dont Walmart and Home Depot come up with their own proprietary payment system? I’ll tell you why. It costs too much!! Let the banks invest and spend then when it comes time for the bank to earn a profit on their investment they’ll buy a Senator or two and unfairly steal from the banks.

Wake up people. Capitalism when allowed to operate freely and correctly is good. As Gordon Gekko said…..”greed is good”. You know what? It is good.

Perk street is a perfect example of capitalism at it’s best!! An opportunity presented itself and the good folks at Perkstreet created, designed, and built a phenomenal product able to compete with the largest banks!! Let’s hope the folks at Perkstreet are rewarded with great profits to compensate for the many long hours they personally invested to make this company a reality? How much is that time worth? Time spent away from family and friends.

Greed is good.

Cheers!
http://www.facebook.com/sunk818 Sun W Kim

> Bottom-line is the banks are charging these fees to recoup costs.

Banks are charging fees to recoup PROFIT not costs.

> costs of fraud prevention

Fraud is a liability for merchant retailers that are out the merchandise, cost of the chargeback, plus any administrative fees. Banks have figured out that they profit more with simplicity instead of locked down security.

> Walmart and Home Depot

It seems we have excluded Kroger Company (Ralphs) as one of the top three US retailers.
http://www.facebook.com/sunk818 Sun W Kim

Right? It is the revenge of the banks. Its a double screw. You bail them out first with tax payer money and then they want to take more of your money in fees.
Brad Chaffee

Well said Robert. I wish more people would realize who’s face pops up behind the curtain when something like this happens. Yes the government. The very people who claim to “protect us” (as if we need them too) cause us the most problems. “Cause a problem so we can fix a problem.” Dick Durbin was the cause of this and I don’t blame any company for trying to recoup profits because after all, businesses are in it to make a profit not to simply cover costs. Where’s the incentive for any company to merely cover costs.

With that said I am NO FAN of Bank of America and left them a long time ago for one simple reason — their customer service is below sub par and they forgot about the customer.I LOVE Perkstreet so much for making the customer and their future a primary objective.

Bank of America is not a bad bank because they want to recoup profits, they’re bad because they use a bank model that is so yesterday. Thank God for capitalism and thank God for Perkstreet. The freedom to choose is why I love this country. If you don’t like Bank of America then use your freedom of choice to pick a better bank. Perkstreet is waiting for your application.
Robertgcormier

I’m not here to defend bailouts. They create moral hazard. However, the fact is most of the Big banks have paid the government back and at a healthy profit. Not a fan of TARP but it will end up making a profit. Recall some banks were forced to accept the capital infusion – they were not given a choice. The inconsistent treatment of companies like Bear Sterns, Fannie, Freddie, and ultimately Lehman resulted in tremendous confusion in the marketplace. The Government should not be in the business of choosing winners and losers. The resulting uncertainty of what the rules are/will be contributed greatly to the financial crisis.

The bailout of the automakers was a travesty. The rule of law was violated and the capital structure was ignored for the benefit of a few well connected constituencies. The end result will be incrementally more expensive capital in the future as a result of ignoring the legal rights of senior debt holders.
Robertgcormier

Question – is it ok then for the banks to charge fees to recoup their costs?
What is wrong with allowing banks to make a profit? Do you want the government in the business of dictating how much profit a corporation can make? I hope not.

If a bank charges too much let the consumer make that decision to leave. If the government wants to impose regulations that make competition more open and fair (like allowing consumers to purchase health care across state lines) I’m all for it. We cannot have a command economy. It doesn’t work. We need a free economy where the markets will take care of uncompetitive practices. Common sense regulations for safeguards and promoting competition are welcome. Just don’t give me a government that chooses winners and losers and stifles innovation by artificially limiting profits. Who gets to say how much profit is enough? What if the government told Apple they could only make $1 per iPod?? Would Steve Jobs have continued to innovate?

If you want to bank with a nonprofit organization feel free. There are many excellent nonprofit organizations that give back to our society. I’m a believer in JFK’s “Ask not…”. We should all give back to society. I wonder how many billions of dollars B of A donates each year? That money has to come from somewhere.

I listed Walmart and Home Depot as an example. I’m sure there are many more companies on both sides of the issue (and both sides of the aisle) that are involved in lobbying. I’m not a fan of lobbying either. Too much $$ corrupting our political system. Both parties are guilty. I want leaders of character who understand their role (which they volunteer for). They should be guided by the principles of Duty, Honor, and Country. Choose the harder right over the easier wrong.
http://www.facebook.com/sunk818 Sun W Kim

> What is wrong with allowing banks to make a profit?

There is nothing wrong with banks making money. Many posters want to blame Congress for banks wanting to retain their profits. Cost is not the same as profit. How banks choose to operate under the new environment is all on them. The distinction is very important because you place responsibility of actions at the correct entity which are the banks.
Robertgcormier

I don’t want to speak for others posting on here but the “new environment” you reference was imposed by Congress. Specifically the Durbin amendment instituted a price cap that banks could charge for certain transactions. This is a zero sum situation where the banks now receive less for transactions and retailers get to keep more. It is as simple as that. A free market would say – if the retailer does not want to pay these fees go to a different vendor. Or better yet build your own payment network. The retailers chose to lobby. So instead of the “invisible hand” we got the government fist.

The banks faced with a new environment imposed by the Congress find themselves receiving a return on their original investment that is less than originally planned because Congress changed the rules after the fact. Businesses need certainty to operate effectively.

I agree with you that the banks made a decision to impose these new fees. They had to make a business decision on whether or not increased fees will drive away their customers.

I think it is reasonable to infer the banks decision to raise fees was not done in a vaccuum and when viewed in context with recent legislative changes (Durbin) there is an incredibly high probability that the fees were imposed in direct response to Congress actions.
Harriett

The whole point of the Durbin Amendment as well as the Dodd-Frank bill is to lessen the impact of banks and financial services on the economy. Over the last twenty years the financial services industry grew to about 20% of the economy, up from a normal range of between 8-10%. This occurred because government restrictions like Glass-Steagal, etc. were removed at the request of the banking industry. I’ve spent many years in the banking industry and banks do not know how to police themselves.

Now, you may enjoy banks eating up a bigger and bigger piece of the GDP pie but remember that banks do not produce anything. They merely work to transfer money from one source to another, and hopefully not take more than their fair share. Congress and the Federal Reserve (who helped promulgate the Durbin Amendment) have, to their credit, realized this fact. Money returned to production will ultimately help retailers, manufacturers and consumers. The banks had their chance, and they blew it.
Chris

Most banks have already paid back the US Government (you the taxpayer) back. WITH INTEREST!
http://www.facebook.com/ILNewsome Isaac Lemar Newsome

Same here, please get my account setup ASAP so I can move everything over ASAP; if not I’m headed back to Ally, their appeal is no/low fees for some of the things you guys charge for. This situation is a Catch 22 for so many as my two employers REQUIRE Direct Deposit. Starbucks Coffee Company and the State of North Carolina both require it now. But even the NC State Employee Credit Union charges $1/month for an account.
Not actually a $10 fee

According to the list of Perkstreet fees, replacing a debit card is free, unless you want it expedited in which case it’s $50.
http://www.facebook.com/sunk818 Sun W Kim

Stop with the free market non-sense already. If we had a free market then Bank of America would not exist today because they would have burned with all the toxic assets they held during the George Bush Jr era.

You’d think Bank of America after it got bailed out with TARP funds and foreclosing on homes, that they’d need to tread carefully with the public. But no, they timed this $5 fee during a time when the American people have no empathy for banks.

Banks deserve everything they receive if they come from a place of greed and not from a sense of wanting to help people.
http://twitter.com/mokb75 Mo Bernard

BoA stands for Broke of America, as coined by Dave Ramsey. I left them three years ago after they stole $700 from account. I had to get a detective. Well, I fought and got my money back. Take your money and run!
http://twitter.com/mokb75 Mo Bernard

BoA stands for Broke of America, as coined by Dave Ramsey. I left them three years ago after they stole $700 from account. I had to get a detective. Well, I fought and got my money back. Take your money and run!
Lincolnrose

I think that BOA showed themselves when they said they were doing the fees because they have a RIGHT to make a profit.

No. You don’t.

In a capitalist structure, in a free market, you have a right to TRY to make a profit. But just like the Constitution gives us the right to PURSUE happiness, but doesn’t say we’ll ever CATCH it, companies should not be under an assumption that they are forever entitled to enough of our money to satisfy their hunger.

If a free market is to really, truly, work, there has to be a tipping point. A moment when enough is enough, and someone has taken too much money from a system. This idea of an endless profit margin ruins societies. It was a big part of the subprime meltdown. Several people thought there was endless money to be made off of packaging, spinning, and reselling bad debt. And like a game of telephone, it passed through so many hands that there was no one to hold truly responsible when it all came tumbling down.
Ilenecha

I too left BofA. They stole my money too. They are not a good bank and their customer service is even worse. I’m not sure where they hire their employees, but they are not very well trained. Too Bad. There are too many of them around. I say close them and put in some on sight Financial Peace Universities. Wow, what a concept. Teach people in the community how to live on what they make, and stop getting taken for a ride.
Caramelkisses61

I just signed up for Perkstreet, Goodbye Suntrust!! I’m not paying $5 a month to use my OWN money!! I’m looking forward to building a long relationship with Perkstreet!!
Jrwells

It boggles my mind that these ‘too-big-to-behave’ banks are blaming a new regulation passed to curb abusive card fees of the past and their rationale for implementing new abusive card fees. Meanwhile, federal financial regulators continue to coddle the big banks, at the expense of small- and medium-size financial institutions, consumers and small businesses. Only the big banks benefit from near-zero percent interest rates. It is killing senior citizens who had carefully ‘laddered’ CDs so that they could live off the interest of these ‘safe’ investments. Now some big banks are actually charging for deposits. What has this country come to????
Deena Meyer

You are THE man Mr. Henrichs! When I heard of the $5 fee (I’m with PerkStreet…won’t bother me!) I wanted to rent a billboard somewhere that said ” DON’T STAND FOR IT AMERICA! Try PERKSTREET! YOU DON’T HAVE TO ALLOW THIS! DON’T BE AFRAID. ”
Selkior

The argument about passing on the “costs” of debit cards is a red herring. Debit card “costs” are a profit center for the banks; the teller services they have replaced are much most costly for banks. The debit card “costs” are a discount from the costs the had with tellers handling transactions.

The Author

Chief Operating Officer

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