Skip to comments.Bank of America's $5 Debit Fee: How Bad Will the Backlash Be?
Posted on 10/02/2011 9:36:18 AM PDT by Diana in Wisconsin
(The news that BofA customers will soon shoulder a monthly charge for debit purchases sparks outrage and threats to abandon the bank altogether.)
Bank of America, proclaiming that its bottom line is hurt by new legislation that limits how much money banks can charge retailers for the privilege of letting customers pay with debit cards, announced that it will make up for those losses by charging customers a $5 monthly fee. The fee takes effect in 2012 and affects any customer who makes debit purchases. ATM and credit card transactions will remain free. Predictably, the bank's customers are not happy. Fox Business Network's Gerri Willis even cut up her debit card on air. The company's stock tumbled Friday morning following the news, and customers are threatening to leave the bank.
How much will this backlash hurt BofA?
Customers are going to jump ship: "I've been a more-or-less satisfied Bank of America customer for years," says Jon Gorey at The Street. But if the bank intends to charge a $5 monthly fee for "something I can do elsewhere for free, I'm gone." There are plenty of other options, including local banks and online-only competitors like ING Direct, which, unlike Bank of America, aren't charging any fees for debit use. "Thank you, competitive free market."
This could spell the end of debit: It's easy for customers to avoid these fees, says Daniel Indiviglio at The Atlantic. "They just have to stop using their debit cards." And it's likely that they will. A $5-a-month fee to use debit "would push me not to use it in any case other than emergencies" especially when that fee doesn't apply to withdrawing cash from an ATM or using a credit card. Indeed, "debit could fade away altogether." "Did Congress kill the debit card?"
Hold on. BofA might change its mind: Sadly, Bank of America isn't the only bank set to start charging debit fees, says Sarah Halzack at The Washington Post. But many see the new fees as "trial balloons" they're testing customers to see how many will tolerate the charges. Consumers should continue to be vocal about their displeasure with these banks, "as they might ax the fee if enough customers gripe about it." "In wake of Bank of America's new debit charge, tips on how to avoid fees"
Actually, Bank of America may win this fight: For now, angry customers are threatening to abandon the bank, says Jessica Dickler at CNN. But it's Bank of America "that could have the last laugh." After all, changing banks isn't exactly a breeze.
Once consumers realize the hassle of it all from having checks printed to switching their automatic payments they're likely going to suck it up and stay with Bank of America.
As a retired USAF member, its very easy to change banks. I have done it many times. Goodbye BoA!
I close my BOA account a couple of years ago.
At one point in time my mortgage was sold to these bloodsuckers. They were the biggest PITAs to deal with.
God Bless My Local Credit Union!
I never bought into debit cards.
I’ve refused for years to use BofA, Citi, and Wells Fargo. Good, let BofA lose a few customers and watch them tank. Too bad, so sad.
Agreed. I have dealt with many banks over the years. In my experience, it's hard to beat a credit union.
Bank of America sucks. I finally left them last year for Navy Federal Credit Union. Guess what, arrogant B of A? It wasn’t that hard! Bank of America’s customer service was terrible and they charged fees for everything. They suck. I’m glad I left and I haven’t regretted it for a minute.
This sucks. But I probably won’t change banks to avoid a $5 monthly fee. I know I should, but it would be too much hassle. I’m sure BOA is counting on bozos like me...
Thank You, Chris Dodd. Good riddance. Take that Frank guy with you while you are going out the door.
Pretty socialist for a FReeper.
I close my BOA account a couple of years ago.
Me too. USAA has been pretty good to deal with.
However, one thing lost in this article and the disdain for BofA is the involvement once again of Bawney Fwank and Chris Dodd. This is another unintended consequence of legislation by this dynamic duo.
It is fiscally irresponsible for a private party with limited funds to bank with BOA. During the last 20 years BOA has made a serious effort to discourage families and individuals with limited income from banking with them. Their complaint has always been based on reducing the cost of services to checking account customers.
There are many small, local banks with a very high level of customer satisfaction. They will learn your name and provide personal services beyond anything a large bank is capable of providing.
Again, it is fiscally irresponsible for a private party with limited funds to bank with BOA. Close the account and move on.
Mine is run completely by women. Not sure that makes a difference, but it seems to! :)
They helped my friend save her home when medical bills were going to wipe her out...
They helped me keep my farm when my POS ex had stolen all of our retirement funds and used them to support his drug addiction...
They’re pre-approving me for a used truck when I need one next year...
Their interest rate on an emergency CC is 8% versus the 24% the regular bank could now legally charge me...
They actually PAY ME a decent interest return on my savings account...
My closing went smooth as silk. They were SO professional and nice!
Can’t say enough good things about them!
“ATM and credit card transactions will remain free.”
Yes, but for how long? IMHO they will soon go the same way as the “free” debit card transaction.
BLUF - Banks are a business that cycle through money. They don’t have large stashes of money sitting the in vaults. Their profit is based on money moving through their institutions. Anything that reduces that flow of money (aka profit) will be made up elsewhere.
With near zero interest rates, a depressed housing market, a purchases of durable goods heading for the bottom there isn’t enough money moving through the banks to pay their bills and their employees. Add to this the real impact of recent Congressional “help” and the banks are hurting.
Their options are to either fail (see the 1933 Depression era “Run on the Banks”) or make money elsewhere.
The question each one of us must answer is: Are we personally better of with a Bank or without one?
I know my answer. What is yours?
See Post 15. :)
They never made much sense to me either. Debit cards hit the checking account directly, so if there are mistaken or fraudulent charges it can cause other payments to bounce, while a credit card provides a firewall between your money and the outside world. Credit cards have better rewards programs. Credit cards have more legal protections which weren't put on debit cards. And credit cards allow me to borrow money for a month and pay it back later, thus I can keep earning 0.01% interest on my checking... hmm, that sounded more impressive back when my checking account was a six percent money market account.
I think I've used debit cards outside of an ATM twice, and both times the bank had to bribe me with some goodie to use it.
Unfortunately, they still set the trends for other banks to follow...I expect to see many other banks adopting the same money gouging, while smiling innocently and saying "But our fees are only half of what BofA charges."
Privatized Crony Capitalism.