Bank of America To Charge $5 Monthly Fee For Debit Card Usage

[garbon]

http://online.wsj.com/article/BT-CO-20110929-709314.html

I don't appreciate silly fees. I'll take my money elsewhere.

--New fee will start in early 2012

--Bank looking to cushion revenue losses from credit card fee caps

--Durbin amendment takes effect Oct. 1


   By Andrew R. Johnson
   Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--Bank of America Corp. (BAC), the largest U.S. bank by assets, plans to charge customers a $5 monthly fee for making debit card purchases starting early next year, according to an internal memo sent to bank executives Thursday.

The fee will apply to customers with various checking accounts during any month they use their debit card to make a purchase. The fee will not apply to customers who do not use their debit card to make a purchase or who only use it to make ATM transactions.

Bank of America is trying to cushion revenue losses it expects to incur from new caps on the fees merchants pay when a customer uses a debit card at their stores. In June, the Federal Reserve Board finalized rules capping such fees at 24 cents per transaction, compared with a current average of 44 cents.

Bank of America has said it expects the caps, which take effect Oct. 1, to erase $2 billion in revenue annually. Industrywide, the caps, which apply to banks with $10 billion and more in assets, could wipe out $6.6 billion in annual revenue for banks, according to an August report from Javelin Strategy and Research.

"The economics of offering a debit card have changed with recent regulations," a spokeswoman for Bank of America said in a statement Thursday.

The fee will apply to various consumer checking accounts but will not apply to customers in certain premium accounts, the bank's memo said.

"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, the bank's memo said.

Other banks have introduced or are testing new fees in response to the debit fee caps, which stem from a provision known as the Durbin amendment in last year's Dodd-Frank financial regulation overhaul legislation.

Wells Fargo & Co. (WFC), said it will charge a $3 fee for debit and ATM cards in several states starting in October if customers use the cards to make a purchase under a pilot program.

J.P. Morgan Chase & Co. (JPM) has been testing a fee in a small market in Wisconsin since February. Regions Financial Corp. (RF) and SunTrust Banks Inc. (STI) have also added monthly fees for some debit-card customers.

[Admiral Yi]

What, in your mind, would constitute a non-silly fee?

[garbon]

What, in your mind, would constitute a non-silly fee?

Maybe if all banks end up following them.

[Admiral Yi]

 

[garbon]

Anyway, I realized I don't care. I think my account might be covered under the exceptions.

[Habbaku]

Stuff like this is why I use a credit union.

[Valmy]

If Chase does this I am bailing.  Screw paying an extra $60.00 every year for no additional services.  Heck if they do it per debit card that would be $120.00.

[Valmy]

What, in your mind, would constitute a non-silly fee?

A fee for a service I requested.  Not a fee retroactively added for no additional services.

[KRonn]

Bank of America is trying to cushion revenue losses it expects to incur from new caps on the fees merchants pay when a customer uses a debit card at their stores. In June, the Federal Reserve Board finalized rules capping such fees at 24 cents per transaction, compared with a current average of 44 cents.

Bank of America has said it expects the caps, which take effect Oct. 1, to erase $2 billion in revenue annually. Industrywide, the caps, which apply to banks with $10 billion and more in assets, could wipe out $6.6 billion in annual revenue for banks, according to an August report from Javelin Strategy and Research. 

This increase seems due to unintended consequences of new regulations, which the govt is doing, thinking to save us consumers some money.     

[derspiess]

I was going to warn you guys about this when Frank-Dodd/Durbin was passed, but figured nobody would listen.  With such a low cap in place for the interchange fees banks can charge merchants, banks aren't just going to take the loss in revenue & smile about it (I wouldn't expect lower prices in stores, either).  So banks are going to do annoying crap like this now that they have zero (possibly less than zero) incentive to offer debit cards to their customers.

Banks have to eat a lot of debit card fraud, and for some of them losing the interchange fees will turn debit cards into a huge liability.  So unless you keep a large balance in your checking account (about the worst place to put your money) or have other important account relationships with the bank, they may decide to just cancel your card.  I think a $5 monthly fee is the tip of the iceberg.

For now, the above only applies to banks with over $10 billion in assets but there are some short term ripple effects that may hurt the smaller financial institutions.  Plus, Visa and/or MasterCard could always bow to pressure from its larger member institutions and flatten the interchange rate across all its issuers.

But in the short term it may indeed make sense to move your accounts to Habbaku Federal Credit Union or some small bank.

[derspiess]

What, in your mind, would constitute a non-silly fee?

A fee for a service I requested.  Not a fee retroactively added for no additional services.

You can thank Messrs. Frank, Dodd, and Durbin plus all the other clowns (Democrat and Republican) who voted for the bill and/or amendment.

[garbon]

Stuff like this is why I use a credit union.

I'd retreat to my credit union account but with no local branches - atm fees would be obnoxiously as well.

[Habbaku]

Stuff like this is why I use a credit union.

I'd retreat to my credit union account but with no local branches - atm fees would be obnoxiously as well.

My credit union gives ATM reimbursement.

[Valmy]

You can thank Messrs. Frank, Dodd, and Durbin plus all the other clowns (Democrat and Republican) who voted for the bill and/or amendment.

Well those guys were not exactly first on my Christmas Card list as it was.

[Grey Fox]

Any Canadian Bank is much worse then that.