For an updated version of this story go to: Banks Wounded, But More Fees Still Likely
Score one for consumers. After a month of public rage over Bank of America’s plan to start charging debit card users $5 a month next year, the bank announced on Tuesday it was scrapping the plan.
“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, co-chief operating officer, said in a prepared statement. “Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”
The bank also made reference in the announcement to the competitive marketplace. The move followed similar reversals by four of the nation’s largest banks in the last week.
On Monday, SunTrust said it would end its $5 monthly fee for debit card users and shortly afterward Regions Bank said it would get rid of the $4 fee it started charging last month. Both banks said they would refund fees already paid.
JPMorgan Chase started testing $3 monthly debit card fees in February, but the company reportedly will stop the practice when its current pilot in Wisconsin and Georgia is completed in November. Wells Fargo announced late Friday that it was canceling its test program after two weeks of testing in Georgia, New Mexico, Nevada, Oregon and Washington.
“As we adjust to changes in our business, we will continue to stay attuned to what our customers want,” said Ed Kadletz, head of Wells Fargo’s Debit and Prepaid Cards in a press release.
Debit card fees seemed to push consumers a little too far – more than other bank fees — as this was a charge for using your own money as opposed to money “loaned” from a credit card. Customers who were trying to control their debt by using a debit card instead of racking up credit were outraged that they would have to pay for that decision.
Other banks and credit unions have been quick to play to that anger and say they won’t impose debit card fees.
TD Bank announced Friday that it wouldn’t charge the fees. According to a recent TD Bank poll, nearly three-quarters of TD customers use debit cards 15 times per month. They cited ease, convenience and no fees as the primary attractions.
“All banks, including TD, are under pressure to respond to the regulatory changes surrounding the banking industry,” Nandita Bakhshi, Executive Vice President of TD Bank said in a press release. “With 70 percent of our customers saying they would discontinue their account if a fee was implemented, we listened to our customers.”
Bank of America’s fee proposal sparked pockets of grassroots opposition. One organizer was Molly Katchpole of Washington, D.C., who started a petition on Change.org to “Tell Bank of America: No $5 Debit Card Fees.” The petition had more than 300,000 supporters just before Bank of America’s announcement.
And customers’ voices may get louder as Saturday’s Bank Transfer Day approaches. The movement is still on, despite the banks’ reversals. Activists organizing the campaign are urging consumers to switch their accounts to credit unions or community banks that day.
But consumers should know that changing banks comes with its own set of potential problems. Consumers Union offers tips for those who want to switch banks at DefendYourDollars.org.
Customers also should be aware that just because a bank says it won’t charge a fee for debit cards doesn’t mean it won’t add charges elsewhere as the industry tries to recoup money lost in recent reforms.
Banks are expected to lose more than $6 billion in annual revenue because the Durbin amendment that kicked in Oct. 1 will reduce by roughly half the amount that banks can charge merchants for debit card transactions.
That comes on top of banks’ loss of nearly $5.6 billion, from restrictions that went into effect in July 2010 that limit what banks can charge for overdrafts.
Sen. Dick Durbin (D-Ill.), author of the swipe fee amendment, praised the Bank of America decision in remarks on the Senate floor Tuesday. “What we have at work here is a very fundamental principle of our economy — the free-market economy: Transparency, so people know what they are being charged. So they have a choice.”