Last Tuesday, Bank of America wisely withdrew its plan to issue a $5 monthly fee for its debit card users. Because the fees totaled only $60 annually, my outrage stemmed not from the price but from the principle: I would have had to spend money to access my own deposited money, which is ridiculous. And I was not alone in my disapproval. President Barack Obama, Senator Richard Durbin (D-IL) and a majority of consumers shared my sentiments.
Because of historically low interest rates, banks can no longer charge high rates on money lent to consumers and businesses, taking a slashing (in the billions) to their income. And in the wake of the new financial regulations from the Dodd-Frank Wall Street Reform and Consumer Protection Act, banks have been struggling to sustain their profitability levels of the past. This particular fee proposal was in reaction to a specific provision in the Dodd-Frank law. The provision reduces the amount banks are allowed to charge merchants for debit-card transactions by about 50 percent.
By the time Bank of America announced its plans, other banks had already been testing debit card fees. For example, J.P. Morgan Chase & Co. had implemented a $3 monthly fee for debit card users in Wisconsin and Georgia since February. But no bank drew the outrage that Bank of America caused.
Tapping into the negative emotions, community banks and credit unions urged customers to switch to smaller institutions with no such fees. And customers paid attention to their encouragements. One week, Bethpage Federal Credit Union in New York signed up 1,500 customers ““ double its normal rate and a harbinger of movement away from fee-charging big banks.
Such ire influenced the majority of big banks, and after eight months of testing, J.P. Morgan Chase & Co. decided to do away with the debit card fees. After much criticism, Bank of America finally joined other large banks that have recently chosen not to impose fees on customers using their debit cards, such as Citigroup Inc. and SunTrust Banks.
However, with Bank of America, strings are still attached. The bank will not rid debit card fees altogether but probably offer ways for customers to avert them by maintaining minimum balances or using Bank of America credit cards. And while we may be free from debit card fees, banks typically make up for those lost fees elsewhere in consumer accounts. Already, banks have been tacking fees onto services that were once free, such as charging for checking accounts.
Bank of America’s retreat is a rare surrender to customer opinions over fees. And while hoping for no new fees is probably naive, at the very least, it is empowering to know that together, consumers can have a say in a bank’s policies.
Email Lee at jlee@media.ucla.edu. Send general comments to opinion@media.ucla.edu.