Millions of people and businesses use debit cards every day. Banks didn't charge customers for their use. Banks actually gave rewards and incentives to customers for using them.
So how did banks make money from debit cards? Banks charged the businesses that accepted those card payments. Merchant transaction fees averaged 44 cents per transaction, but, due to a new government regulation, fees are now capped at 24 cents.
It is estimated that the banking industry will lose billions. Some banks are now starting to charge their customers a monthly fee for card use. Bank of America just made the news by announcing a $5 per month debit card fee. Customers are angry.
In this activity we take a look at the math behind this fiasco. Will Bank of America come out ahead or lose money with the new debit card fee structure?
CCSS: 5.NBT.5, 7,EE.3, MP1, MP2, MP3, MP6
Members can download the solutions to this activity below.