Bank of America Joins Checking Account Fee Party with New $5 Charge for Debit Card Use
Bank of America on Sept. 29, 2011 announced plans to begin charging $5 monthly fees to customers who use their debit cards to make purchases, effective in early 2012. This move makes BofA, the largest U.S. bank by total assets, the latest in the growing line of major and regional banks to either cut checking account rewards or institute new fees for debit card use in anticipation of the debit card interchange fee cap that is set to take effect on October 1.
"The economics of offering a debit card have changed with recent regulations," Bank of America spokeswoman Anne Pace said in a statement." 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.”
Interchange fee regulation was originally provided for by the Durbin Amendment to the Wall Street Reform and Consumer Protection Act, which directed the Federal Reserve to study, suggest and implement limits on the fees banks charge merchants whenever a debit card is used to pay for a purchase. The Fed’s final rule on the matter, issued June 29, set the upper bound for so-called debit card swipe fees at around 24 cents per transaction. According to the credit card comparison website WalletHub,
While the Durbin Amendment and the Fed’s resulting regulation were intended to lower costs for merchants and, eventually, for consumers as well, some personal finance industry insiders forecast a much different outcome, including the gradual disappearance of debit card rewards as well as the implementation of checking account fees designed to help recoup the roughly $9.4 billion in interchange fee revenue that banks are expected to lose. And, with Bank of America, Chase, Wells Fargo, SunTrust and Regions Bank, all either experimenting with or adopting fees for debit card use, it indeed seems they were right.
Nevertheless, Senator Dick Durbin (D-Ill.), who sponsored the interchange fee regulation that bears his name, did not take kindly to Bank of America’s announcement.
“It seems that old habits die hard for Bank of America,” he said in a statement. “After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers. It’s overt, unfair and I hope their customers have the final say.”
However, experts agree that Bank of America is well within its rights to add fees to their checking account offerings. They also see a few different scenarios in which consumers can avoid costly checking account charges.
“It’s important to note that the Durbin Amendment only applies to debit cards issued by banks with at least $10 billion in assets,” said Odysseas Papadimitriou, CEO of the credit card comparison website WalletHub. “As a result, consumers interested in keeping a checking account and continuing to use debit cards to make purchases may be able to avoid new fees by taking their business to small local banks. Alternatively, they can consider replacing their checking accounts with prepaid cards, which provide the same utility minus the ability to write paper checks. Finally, they could essentially turn their credit cards into debit cards by signing up to have their monthly payments be automatically withdrawn from a checking account.”
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