Bank of America Nixes $5 Debit Card Fee
AP | 11/1/2011, 4:33 p.m.
NEW YORK (AP) - Bank of America Corp. is scrapping its plan to charge a $5 monthly fee for making debit card purchases after an uproar and threatened exodus by customers. The about-face comes as customers petitioned the bank, and mobilized to close their accounts and take their business elsewhere. The outcry had already prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel tests of similar debit card fees last week. SunTrust Banks and Regions Financial Corp. followed suit on Monday.
Anne Pace, a spokeswoman for Bank of America, declined to say whether the company experienced a spike in account closures since announcing plans for the debit card fee in September. But in a statement Tuesday, Bank of America's co-Chief Operating Officer David Darnell said the decision was based on customer feedback. "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," he said. Pace added that a "changing competitive marketplace" also played a role.
The retreat by the banking industry on debit fees comes amid growing public anger over higher bank fees. "When I heard about the fee, it was the last straw for me," said Molly Katchpole, a 22-year-old nanny who started the online petition urging Bank of America to drop the debit fee. "I'm living paycheck to paycheck and one more fee was just too much."
Katchpole said it was exciting that customers were able to sway a big corporation to rethink its decision. But she already closed her account a few weeks ago and said the bank's decision won't win her back. She plans to stay with her new community bank in Washington, D.C.
Other customers may be more forgiving. Diane Abela, a 38-year-old Manhattan resident, said she had been waiting to see if Bank of America would back down on its plan before closing her account. "I had a feeling if there was big outcry, they wouldn't go through with it," said Abela, who is unemployed. She said she would've canceled her account if the bank had followed through. "I'm unemployed and $5 makes a big difference," she said. "When you're working on a budget every week, it's the last thing you need."
Unlike Chase and Wells Fargo, Bank of America's announcement that it would start charging customers a monthly debit card fee had come without any testing in the marketplace. Instead, the decision to roll out the fee early next year was based on internal surveys with customers. Pace declined to detail the nature of those surveys but said that in the past couple of weeks, "customer sentiment changed." The banking industry's retreat from a debit card fee doesn't mean customers aren't seeing higher fees elsewhere, however.
This past spring, for example, Bank of America raised the monthly fee on its basic checking account to $12, from $8.95. The Charlotte, N.C.-based bank is also testing a new menu of checking accounts with monthly fees ranging from $6 to $25 in Arizona, Georgia and Massachusetts. Pace said the pilot program is seeing "good results" and that the bank plans to move ahead with its rollout sometime next year. Other, smaller fees may be nicking away at customer accounts as well. In September, the bank instituted a $5 fee to replace debit cards, with overnight rush delivery costing $20. Both services had previously been free. The unwelcome changes for consumers aren't limited to Bank of America.
Chase this year also doubled the fee on its basic checking account to $12 a month. But the bank says it will end a test in Georgia of a basic checking account that charged a $15 monthly fee. And like many other banks, Wells Fargo ended its debit rewards program earlier this year after doing away with its free checking accounts with no strings attached late last year. The wave of fee hikes comes as the industry adjusts to new regulations. In particular, banks in the past year have blamed their fee hikes on a new federal regulation championed by Senator Dick Durbin of Illinois.
The law, which went into effect last month, caps the amount banks can charge merchants whenever customers swipe their debit cards. JPMorgan has said it would lose $300 million each quarter as a result of the regulation; Wells Fargo said it would lose $250 million a quarter.