Bank of America Hits Debit Card Users With $5 Fee
Bank of America will slap a $5 monthly fee on some customers who use their debit cards to make purchases starting early next year, reports Dow Jones Newswires.
“The economics of offering a debit card have changed with recent regulations,” a spokeswoman told Dow Jones.
Most basic checking accounts at BofA will see a 40 percent jump in monthly costs and the bank says the debit fee will be waived for customers that upgrade to “premium” accounts which require higher minimum balances.
In October, the Dodd-Frank financial reform law will lower “interchange fees,” which is the amount banks can charge retailers for debit transactions. Fees for retailers will shrink from 44 cents to a cap of 24 cents, which has led some debit card issuers to seek other ways to make up that revenue.
“This new fee allows us to continue to offer the convenience of a debit card with the full range of added features customers have come to expect,” including fraud protection and monitoring, special savings programs and other services, a bank memo stated, according to Dow Jones.
Until this BofA decision, less than 2 percent of checking accounts charged a monthly or annual fee for using a debit card, says Bankrate.com. The multinational bank serves one in two households in the United States, according to its 2010 annual report.
“Fees for debit card usage is just something we’re going to see a lot more of in the weeks and months ahead because banks are going to be making less revenue every time a consumer swipes that card,” said Greg McBride, senior financial analyst at Bankrate.com.
Bank of America is not the first bank to add a $5 per month fee for using a debit card. Atlanta based Sun Trust blazed the way this summer and giants Wells Fargo and JPMorgan are testing $3 debit card fees.
Credits unions and community banks are more likely to offer fee-free banking.
“As consumers we’re not hostage to these fees,” said McBride. “We can resort to other methods of payment or vote with your feet and go to some place that is not going to charge you that fee.”
Earlier this week, ABC News’ Matt Gutman reported on the rise in bank fees for consumers across the nation. Another victim of financial reform seems to be free checking.
Since the fourth quarter of 2009 through June of 2011, the number of big banks offering free checking accounts has declined by 54 percent, according to research firm Moebs Services.
“With a loss of $5 billion in interchange fee revenue looming for 2012, with restrictions put on fee revenue…and with the cost to operate a checking account climbing, it’s clear Bank of America, Chase, Wells Fargo, and the rest of the [Too Big To Fail] gang are going to get out of the free checking business,” Moebs said in an August statement.
A call and email to a spokesperson for Bank of America weren’t returned.