published Saturday, October 1st, 2011

Bank of America debit fee is only the latest

A customer uses a Bank of America ATM in Charlotte, N.C. When Bank of America starts charging customers a $5 monthly fee in 2012 to swipe their debit cards, the 38.7 million people who carry them will have to decide if the convenience is worth the money.
A customer uses a Bank of America ATM in Charlotte, N.C. When Bank of America starts charging customers a $5 monthly fee in 2012 to swipe their debit cards, the 38.7 million people who carry them will have to decide if the convenience is worth the money.
Photo by Associated Press /Chattanooga Times Free Press.


AP Personal Finance Writers

NEW YORK — Angela Malerba, who works in public relations in Boston, carries a debit card because she likes to know when she buys something that she has enough in her account to pay for it. But paying $5 a month to use her own money? That’s too much.

So when Bank of America starts charging the fee next year, Malerba figures she’ll rely more heavily on her credit card. Or, in a strategy that seems almost quaint in these swipe-and-go times, she may just carry more cash.

“Paying $60 a year in debit card fees just seems absurd,” she says.

The 38.7 million people who carry Bank of America debit cards will face a similar decision in the latest example of banks raising fees or establishing new ones — not just for debit cards but for visiting ATMs or talking to a teller.

Bank of America’s announcement follows tests by Wells Fargo and Chase for $3 monthly fees for debit cards in some markets. Other banks have begun charging for basic checking. Banks have sharply restricted their rewards programs for debit cards.

Bank of America said the fee will apply only when customers use their debit cards for purchases in a certain month. The fee will not apply if the card is used only to access ATMs. It will not apply for premium customers, who keep high balances.

Debit fees hit particularly hard because banks have spent the past decade encouraging their customers to go for the ease of the cards, which deduct purchases immediately from a checking or savings account.

In 1995, debit cards accounted for only 1 percent of the transactions when people pulled a card out of their wallet to pay for something. Credit cards made up the rest.

Debit cards grew steadily, hitting 50 percent in 2006. Today, there are more than 530 million of them in use in the U.S. Two out of every three times someone reaches for plastic, it’s debit, according to the Nilson Report, which tracks the card industry.

Credit cards still make up 56 percent of the money spent, according to the report. So when people use debit, it’s for the forgettable, smaller transactions of everyday life — a pack of gum or a cup of coffee.

Banks have cashed in big. They collect about $19 billion a year from swipe fees, the pennies they collect from a store every time you run your card through a magnetic reader at the checkout counter.

On Saturday, that revenue will be cut almost in half. Federal rules will cap the amount banks can charge merchants at about 24 cents per transaction, down from an average of 44 cents.

It’s the latest regulation imposed on banks. Last year, strict rules on credit cards limited when they could raise interest rates and virtually eliminated customer fees for going over credit limits. Then the Federal Reserve tightened rules for when and how often banks could charge for checking account overdrafts.

But each regulation aimed at reducing the costs for consumers has chipped away at bank revenue — and left banks going so far as to make the customer pay for services that had been offered at no charge.

Bank of America, for instance, created a checking account that is free only if the customer banks online and at ATMs. Get a paper statement or visit a teller, and there’s an $8.95 fee for the month. found recently that 45 percent of non-interest-earning checking accounts are free today, down from 76 percent two years ago. Minimum balance fees, ATM surcharges, foreign transaction fees and more have also proliferated. Many banks even charge customers a fee for drawing on lines of credit linked to checking accounts, which most users seek in order to avoid overdraft fees.

Customers are frustrated. Jose Bucheli, a graduate student in Albuquerque, N.M., thought back to the economic crisis of 2008, when banks pledged to stand with customers.

“But whenever they have the opportunity, they impose a new fee,” he says. “I understand that Bank of America is a business, and trying to maximize its profits, but I’m trying to maximize my profits, too.”

Bucheli doesn’t like to carry cash and relies on his debit card for almost everything, so he isn’t interested in getting around the fee by using a credit card. “I can change banks and beat the fees that way,” he says.

Some banks are trying to take advantage of that impulse. The regulation doesn’t apply to banks with $10 billion or less in assets, which may give some community banks and credit unions an edge.

Consumer advocates suggest credit unions as a haven from fees. BECU, a Seattle credit union, says its membership has risen 18 percent in the past year. Many of the newest members say they’re switching because of bank fees, a spokesman says.

Some larger banks are also resisting the urge to tack on charges, instead trying a no-fee strategy to lure customers. Huntington National Bank, based in Ohio, has marketed “Asterisk Free Checking” since May. Mary Navarro, director of retail and business banking there, says the growth rate for new accounts almost doubled.

“It’s not the customer’s fault that the banks have more regulation,” Navarro says. “These fees, that really does impact the consumer’s wallet, and I don’t think they like it.”

They may grumble, but probably few will switch banks. Bank inertia is powerful: Think of the paperwork of changing direct deposits, the hassle of redirecting automatic bill-paying setups and the difficulty of figuring out exactly what other banks charge.

“Unraveling all that is a mess, and that’s one thing that really works in the bank’s favor for retaining the customer,” says Brian Riley, research director of bank cards for TowerGroup, a consulting firm. “At the end of the day it’s just hard to change.”

In Baltimore, Meredith Gould, a Bank of America customer, says she will probably grudgingly pay the $5 a month. It depends, she says, on “how consumer-guerrilla I want to get about it.”

“I hate it. It’s wrong,” she says. “But $5 a month — that’s less than going to the movies.”


Carpenter reported from Chicago.

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Astropig said...

An easy workaround-

1) Go to Ally dot com. Sign up for their checking account. They will send you free checks and a free debit card.

2) Link your bank account that you presently use to Ally. They will show you how online.

3) Lock your current bank debit card away. You won't need it anymore.

4) When you deposit money or have direct deposit, transfer that exact amount (less any recurring debits) to Ally. You can now use the Ally card at any ATM for free (they refund your ATM fees at the end of the month)

5) tell your greedy bailout bank to stuff that fee where the sun don't shine. You got a two-fer- Not only can they not charge you a debit card fee, you deny them the swipe fees that they would have earned from your everyday use.

Keep that $50-100 per year that you just denied your greedy bank and spend it on yourself or your family,which deserve it a lot more than Bank Of America.

October 1, 2011 at 11:37 a.m.
terrybham said...

Show the Bank of America how you feel-close your account with them. If enough people do that the other banks will think twice before charging additional fees. If you can open an account at a credit union, do so. The banks need to know that the people are serious about being shafted.

October 1, 2011 at 11:44 a.m.
jannibee65 said...

I think all of BOA's customers should start demanding their withdrawals in all pennies... just to annoy them. ;-) Seriously though, the article mentions that the smaller banks and credit unions are not tied to these new "regulations" so I would think that would be the way to go in order to avoid the fees. Capital Bank in Catoosa has no fees, and according to the person I spoke to there yesterday, they do not plan to.... great place to bank, we have been very happy there.

October 1, 2011 at 2:23 p.m.
patriot1 said...

Thanks Chris Dodd and Barney Frank.........just had to stick it to us a little more, huh?

October 1, 2011 at 4:19 p.m.
AlmostAmanda said...

Yeah, Christ Dodd and Barney Frank forced the poor helpless multinational banks to charge every customer to withdraw their own money. I mean, it's not like those banks are already posting astronomical profits... oh wait...

The banks made this choice. They should suffer the consequences. I know it's frustrating, but if you do close your account with BoA or any other large bank, remember it's the corporate weasels who make the policy, not the tellers behind the counter. Asking for your money in pennies won't do a thing to the people who actually made this decision. I recommend a credit union or a smaller local bank when you leave. You get fewer bells and whistles, but you get far better service, better rates, and the only fees tend to make sense.

October 1, 2011 at 9:50 p.m.
Salsa said...

Just don't use debit cards. Problem solved.

October 1, 2011 at 10:30 p.m.
prairiedog said...

I have a BOA debit card and I have paid most of my bills using their "free" online system for several years. I certainly save more than $5 a month in postage just from the electronic payments and the few bills that BOA has to send through the mail. In return for this, I keep a $1000 balance in the account and avoid the $15 a month fee I'd pay otherwise. I do not use the debit card for purchases anyway, and certainly won't do it after this unless it's a real emergency. There are costs associated with servicing "small" checking accounts, and this is what BOA is attempting to recoup with the fee. The main thing the banks can do is cut executive compensation and redundant labor costs, and they can still probably find tons of people willing to take the jobs for more reasonable salaries. The CEO culture in which people who have not invested a lot of their own money at risk are paid millions in annual salaries needs to go by the wayside as a luxury that the world can no longer afford. Divest the compensation for CEOs from stock prices, and give tax credits for job creation (like hiring 100 bank tellers who will pay income tax by cutting CEO compensation to something around what the President of the United States makes) and other efforts that result in economic growth. We need a national shift in priorities from consumerism to stewardship, and those are the efforts that should be rewarded by our government since creation and sustainment of jobs is the failsafe method of raising tax revenues. Get a lot more people paying a little bit of tax, and we can have our cake and eat it too.

October 2, 2011 at 12:23 p.m.
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