Some may have seen this story on television.  The CBS Evening News
adapted this story for television on its April 30 broadcast, although
bankers here in Chicago were so embarrassed they would not speak to the
reporter.  I am sharing this article for those working on banking and ATM
access issues.  When ATM's are not accessible to the blind with voice
prompts, an alternative way to get cash is to use a pin-based debit card
to minimize the use of cash and receive up to $50 cash back from
purchases.  The bankers claim they are losing money from the pin-based
debit transactions.  As is stated by the figures in the article below,
this is a half-truth.  On a $50 grocery purchase, the banks earn six and
a half cents on the pin-based debit card transaction and 80 cents for the
signature based transaction, which does not offer cash back.  The
supposed loss of money is 73 and a half cents:  the difference between
the signature-based and pin-based debit transaction.  The banks do not or
are slow to provide access to ATM's to blind persons but charge us fees
on the services that do provide access to cash to us, such as pin-based
debit card transactions, teller assistance, and using another bank's ATM.
How more unreasonable can they become?

Kelly


Crain's Chicago Business

. April 29, 2002

Another bank fee: debit cards
Customers pay  for convenience

by Steve Daniels

Photo caption:
Second thoughts: TCF Financial stopped charging for debit transactions
because the practice alienated customers, says Senior Vice- president
David Creel.
Photo by: Brett Kramer


Several large Chicago-area banks are charging customers a fee each time
they buy groceries, pump gas and purchase other retail goods with their
debit cards - a money-making strategy that may be adopted by other area
banks.

Fifth Third Bancorp, Charter One Financial Inc. and First Oak Brook
Bancshares Inc. are among the financial institutions that charge fees
ranging from 50 cents to $1 for each debit card purchase.

Debit card use - more wide-spread along the East and West coasts - is
relatively new in the Chicago area. Still, many of the area's best-known
retail chains - Jewel-Osco, Walgreens, Wal-Mart, Target and most gas
stations - offer the service.

Before these new fees surfaced, debit cards were viewed by consumers as a
cost-effective alternative to credit cards and as a value-added service
on the standard bank automated teller machine (ATM) card. A customer can
use the card - with a personal identification number (PIN) or a signature
- to make purchases at checkouts, with the transaction totals debited
directly from his or her checking account.

Debit transaction fees haven't been adopted by market leader Bank One
Corp. nor other big local banks like LaSalle Bank N.A. and Harris
Bankcorp Inc. Representatives of those banks say they have no plans to do
so.

And Minnesota-based TCF Financial Corp. has discontinued the practice,
saying it only confused and alienated its local customers, according to
David Creel, a TCF senior vice-president based in Burr Ridge.

'Fee creep'

Nonetheless, consumer advocates say such fees are likely to proliferate
if the banks that charge them feel little or no customer backlash. They
point to the other new fees banks have instituted in recent years,
including charges for getting cash from other banks' ATM machines and
fees for using tellers to handle transactions.

"We warned (six years ago) that ATM fees were the beginning of 'fee
creep,' and that debit transactions ultimately would be assessed a fee,"
says Gail Siegel, executive director of the non-profit Coalition for
Consumer Rights in Chicago. "And that's what seems to be coming to pass."

Banks already make money on debit transactions by sharing in the
transaction fees that networks collect from retailers offering the debit
service. But banks get paid considerably less by networks that process
PIN transactions than by those that handle signature transactions.

To make up for the smaller payments they receive from the PIN networks,
some banks assess fees on PIN-based debit card use only.

For the banks, the difference between the signature and the PIN is not
small change.

Last year, U.S. banks collected $3.88 billion in interchange revenues
from signature debit transactions and just $520 million from PIN
purchases, according to the Nilson Report, an Oxnard, Calif.-based
newsletter covering the debit and credit card industry.

On debit transactions in the Chicago market, banks collect a flat fee for
each PIN transaction processed through the Star system - the former Cash
Station network, now owned by Memphis, Tenn.-based Concord EFS Inc. On
signature transactions, they receive a percentage of the purchase total.
So, on a $50 grocery bill, a bank will collect 6.5 cents if the customer
punches in a PIN, but 80 cents if the customer signs for the purchase,
bankers say.

Retailers push PINs

It's the other way around for retailers, however: They pay more to the
networks for signature purchases than PIN-based ones, so they tend to
encourage customers to use the PIN.

"If you start getting merchants prompting PIN (use) at the point of sale,
then you will have more and more banks imposing fees for PIN," says David
Robertson, president of the Nilson Report.

Cincinnati-based Fifth Third, with 116 branches and $6 billion in
Chicago-area deposits, began charging $1 per PIN transaction here last
fall, just months after its June entry into the market through the
acquisition of Old Kent Financial Corp.

"In an effort to recoup some of our costs, that's why the fee is passed
on," says Robert Lapinski, Fifth Third's marketing director based in
Rolling Meadows. "In this particular case, we just feel it's appropriate
(to charge the fee) when people use the card that way."

First Oak Brook Bancshares, with 14 Oak Brook Bank branches and $1.5
billion in deposits, has been assessing a 50-cent fee on PIN purchases
for several years and has heard no outcry from customers, says Susan
Peterson, executive vice-president in charge of retail.

'A legitimate fee'

Charter One, with 80 branches and $6.2 billion in deposits in the Chicago
area, has coupled the PIN fees with a program in which customers earn
points toward purchases at restaurants and other retailers with each
signature-based debit transaction.

"Like any other (company) in America, where you create value and
convenience for a consumer, you're entitled to make money from it," says
David Bowen, senior vice-president in charge of retail product management
at Cleveland-based Charter One. "It's a legitimate fee to collect."

In January, Charter One doubled its debit fee to $1.

Few customers understand the distinctions, though.

Amanda Solon was a customer at St. Paul Bancorp Inc., which Charter One
acquired three years ago. She couldn't understand why, after the
ownership changed, fees of $8 to more than $20 were appearing on her
monthly statements. She estimates she's paid hundreds of dollars in debit
fees.

"A couple of times, I went to the bank and the tellers couldn't tell me
what the fees were for," she says. "I finally was at the Dominick's and
was checking out and the woman said, 'Don't you get charged on these?'
So, a woman at Dominick's gave me more information than any one of the
tellers could."

A marketing decision

That kind of consumer horror story is the reason that TCF, which has
branches in many Chicago-area Jewel supermarkets, rescinded its 75-cent
debit fee this year.

"Some customers understand it; most don't," TCF's Mr. Creel says. "We
felt there was a far greater competitive advantage to dropping the fee
than keeping it."


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