Debit card fees disappear in unison
November 06, 2011
Following a wave of protest from consumers and public officials, the debit card fees announced by major banks in recent months have effectively vanished.
The sheepish retreat by Wells Fargo, Bank of America, JP Morgan Chase and other banks came in the turbulent wake of consumer outrage, which showed no sympathy for banks who are expected to lose about $6 billion a year from a new federal cap on debit card swipe fees.
While Wells Fargo and Chase had been testing the checking account debit card fees in select markets, Bank of America triggered the national upheaval by announcing a $5-a-month debit card fee to start in 2012. Bank of America, the second-largest bank in the U.S. by deposits, said the charge was needed to cover the cost of a checking account in the wake of new federal restrictions imposed by the Dodd-Frank act.
Banks react to customer threats
Faced with the threat of untold number of customers closing their checking and savings accounts and moving to smaller banks or credit unions, the big banks have changed their plans in near-unison.
Wells Fargo, the fourth largest bank in the U.S. by assets, jettisoned its five-state pilot plan in which customers were to pay $3 a month to use a debit card. Chase canceled its debit card charge plan after an eight-month trial in two states.
Bank of America initially backtracked on its fee plans, saying that it would only charge the fee to customers who didn't meet certain basic requirements. But within days a statement appeared on the company website that announced the death of the debit-fee plan in its entirety.
The cost of checking account closures
The Wall Street Journal said the three banks were expected to lose a great deal of money by driving customers away with debit card fees on their customers' checking accounts. It estimated:
- Bank of America would lose $475 million quarterly
- Chase and Wells Fargo would each lose $250 million quarterly
The Associated Press reported that community banks and credit unions have seen large increases in new customers following the recent fee announcements.
New checking fees persist
Despite rolling back the debit-fee plan, Bank of America still plans to introduce new checking account programs next year that could carry monthly fees as high as $20. Citibank has also imposed new fees on some its checking accounts.
So while consumers may have won the debit-card battle, it is unlikely that they've heard the last on new fees from their bank.