Pull the wool over my eyes, please!

I’m annoyed enough with Bank of America’s new debit card fee that I may switch banks. More on that at the end of this post. But first, Kevin Drum gets the TIE No Nonsense award for explaining the blessing and the curse of the new fees.

[I]t’s hard to explain why [the new debit card fee] is, nonetheless, a good thing. But here’s the nickel version: the old fees were largely hidden. The new ones aren’t. […]

So yes: the new fees are annoying. But that’s a feature, not a bug, because now they’re right up front in black and white, which means that consumers will see them and can be properly outraged (or not) by them. This in turn means that the free market has a chance to actually work: consumers will abandon Bank of America if their fees are too high and force them to charge less. Likewise, other banks will compete openly on the size of their fees. In the end, this competition will force fees down to the lowest possible profitable level, which is exactly what competition is supposed to.

Of course this is correct. A crucial element of a well functioning, competitive market is transparency of prices. By being out in the open, the new debit card fees provide the information consumers need to make informed choices. In economics speak, this should be welfare improving.

But, it is annoying. I am annoyed. I wasn’t annoyed before, even though I knew there was a hidden swipe tax. That I feel this way  is irrational, but I don’t care. Feelings are feelings, and the irrational, feeling part of me wants things to go back the way they were, even as the economist in me knows things are better now.

There’s a lesson here for health care. Many policy experts and economists think it’d be far better if people knew the cost of health care, if they were aware what their full, employer-sponsored premiums cost, etc. I agree. Transparency is the right way to go.

But make no mistake, people will be annoyed. No, that’s not right. A $5/month debit card use fee is annoying. Suddenly learning that your income is lower than it would otherwise be by $10,000 because of your “employer-paid” premium is not annoying. It is enraging.

What will Americans do when they finally recognize the full cost of health care? If market advocates think they will vote with their feet and find cheaper options, they’re right. I’m sure that will happen. If they think people will be satisfied paying, say $8,000 for health insurance instead of $10,000, I think they’re engaging in some wishful thinking.

I think many people will be furious at how much of their paychecks are, effectively, being piped into the pockets of health insurers, health care providers, drug manufacturers, health IT gizmo creators, massive radiology machine developers, other device makers, and government programs. Some will think the return is worth the price. Many will not, particularly those who think insurers are wringing them dry.

What then? I can’t help but think that’s when people turn to government. After the market has adjusted, provided new products with higher deductibles and more managed care (or whatever the latest private-side cost control mechanisms are), people will still not be happy. More of them may then look to political leaders and say, “Do something about this. NOW!!!”

Transparency is the right way to go. But there’s no telling what market and extra-market fury it might unleash. I’m not making any firm predictions here. My feet are securely planted in the zone of speculation. (I’m entitled to three seconds, right?) I’m just saying we don’t know what passion can do. Be careful what you wish for. (And, for all that, I’m wishing it too.)


Now, as for leaving Bank of America, I asked my good friend TFB for some suggestions for online banking, and here’s what he wrote me,

If you don’t care about interest, Fidelity Cash Management account is a good one. It has no minimum and you get practically everything (free checks, good bill pay). All ATMs in the world are free (ATM fee rebated). Deposit checks by taking a picture of a check.

My post from 2007: http://thefinancebuff.com/best-checking-account-which-is-not.html

Fidelity: http://personal.fidelity.com/accounts/aong/fcma_learn.shtml?refpr=CMGTOC002

If you can live with some limitations on ATMs, Alliant Credit Union pays 1% interest. It doesn’t give ATM rebates but it leverages ATMs of other credit unions and those operated by 3rd parties (e.g. ATMs in 7-11s). Some of those ATMs take deposits. I have one in the cafeteria at my workplace.

My post: http://thefinancebuff.com/alliant-credit-union-bumpy-ride-to-high-yield.html

ATM locator: http://www.alliantcreditunion.org/about/atms/

If you have a separate savings account, the Alliant checking account can serve as both checking and savings since it pays good enough interest.

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