BofA: Dumping Debit Fee? Not Quite
Consumer backlash over debit card fees has got big banks backpedaling to keep customers grown weary of being nickled and dimed to death. On Friday, in the midst of reports that JPMorgan Chase was dropping the $3 debit card fee that it had been testing in some markets, Bank of America is also changing its debit fee policy, knowledgeable sources confirmed to CBS MoneyWatch on Friday.
"The fee isn't going away," said this knowledgeable source, who was not authorized to speak on the topic, so asked to remain anonymous. "But consumers will have several ways to avoid it."
A Reuter's story suggested that consumers might avoid the fee by having paychecks direct deposited or having multiple relationships with the bank. This source did not deny these possibilities but said the precise formula has yet to be determined. "The policy is evolving."
"It's clear that Bank of America is feeling the heat and is looking for ways to respond to the overwhelming public opposition to its unfair debit card fee," said Norma Garcia, manager of Consumers Union's financial services program. "If Bank of America wants to show that it is listening to its customers, it should drop the debit card fee altogether. Consumers shouldn't have to pay a fee just to have access to their own money."
Bank of America announced earlier this month that it would start charging a $5 monthly fee to anyone using their debit cards for point-of-sale transactions. The move was in response to something called the Durbin Amendment, which restricts "interchange fees" that have been largely invisible to consumers. Interchange fees are paid by merchants every time you use a credit or debit card.
Banks and payment processing companies, such as MasterCard and Visa, each get a portion of these fees. They've typically shared a portion of this lucrative action with consumers through rebates as a way of encouraging people to use the cards (and boost their fee revenue). Now that banks can't charge as much to merchants, many issuers have halted the give-aways and started charging consumers to use the cards instead.
But many consumers considered this latest move a last-straw. Already incensed by the multi-billion-dollar taxpayer bailouts of banks -- which never delivered the promised increase in the availability of credit -- rising costs and diminished services, consumers have been dumping their big banks for credit unions and smaller community banks. Both consumer groups and independent bankers have been encouraging the trend, sometimes even offering bribes to disenfranchised big-bank customers to switch. People's Bank of Ohio, for example, said it would pay its customers $5 a month for using their debit cards. And Consumer's Union published an online guide, instructing people exactly how to switch banks.
Consumers also have other ways to avoid the fees, including by simply using their credit cards and paying them off each month. The credit card business remains hyper-competitive, which means banks are offering cards that pay rewards and don't charge annual fees.
For more reporting on this topic, check out 5 Ways to Profit from the Debit Card Fee-for-All and The Dangers of Using a Debit Card. We've also recently crunched numbers to show which states have the highest average bank fees in several key categories.
