• Tech

Take This Fee And Shove It

4 minute read
Bill Saporito

I may be handing American express the pink slip. Its unending fees are bugging me. I recently fired Mint, a car-sharing program, for gouging me for being 40 minutes late. Mint was intransigent about it, and so was I; I drove my business to Hertz on Demand. I dumped American Airlines years ago after enduring the umpteenth cramped New York–to–Dallas flight, but then again, like you, I have fired every airline. They’re hard to fire forever.

Many people are soon going to decide whether to fire their banks and credit-card issuers. Bank of America and others are adding monthly fees for the privilege of using your debit card. They’re also raising minimum balances for free checking and hiking other fees. The banks blame new regulations that have cut debit-card transaction fees, but in truth they’ve been subsidizing free checking with high fees elsewhere: for lateness, overdrawing or busting your credit limit. “They had a punitive way to treat us if we made mistakes,” says Dan Ariely of Duke University, author of Predictably Irrational, who studies consumer behavior. “It was an easy way for them to charge us, a way to use our limited cognitive ability and abuse us.” The new fees are transparent, and it’s the transparency that’s ticking us off. More galling is the idea that the banks have been so mismanaged that they now need to pick our pockets to sustain their profits.

That’s why if Chase tries to ding me for spending my own money, I may be outta there. Meanwhile, Chase is going to decide if it really wants me hanging around the vault. Across the economy there’s a constant calculation being made by service providers and consumers. The math goes like this: acquiring a customer is expensive, while the lifetime value of a loyal consumer grows exponentially. Think about all the offers you get in the mail from credit-card issuers, banks, airlines, charities and, um, magazines. Consider the money spent by beer, auto and airline companies on advertising: it’s not unusual for marketing to eat up 10% of revenue, so clearly the companies think landing new customers is worth the cost.

Once they’ve got you, firms evaluate your profitability to determine how much service they’re going to offer or even if they should dump you. It’s called bucketing. “Everyone should know they are being bucketed,” says Patricia Sahm of Auriemma Consulting Group, a financial-services consultancy. By that she means you are being put in one of four value buckets: high, low, medium or no. A no-value customer–minimum balance, no mortgage with the bank, writes lots of checks–who whines about a $5-a-month debit-card fee is going to be told, “See ya later.” For a high-value customer, with a fat balance and a brokerage account, the answer will be “Fee? What fee?”

I’ve been an AmEx customer for more than 20 years, and so has TIME; clearly AmEx earns good money from both my business and personal spending. That probably makes me worth keeping, so maybe AmEx will throw in some free miles when I threaten to quit over things like steep late fees or foreign-transaction fees. (Money doesn’t know where it is, so why should I pay more to spend it in Japan?) On the other hand, Mint doesn’t know me that well or didn’t care to, so it was willing to risk the $500 to $1,000 I’ll spend this year renting cars for the $25 late fee. Fair enough, but I’m still gone.

The thought of firing your bank or credit-card issuers feels good, but they’ve got a big advantage over us in the form of inertia: it’s a pain in the butt to switch accounts. Maybe I won’t move if my bank raises the rent, but I certainly have to threaten to. There’s only so much money out there. I just want to keep my share of it.

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