Bank of America listens to customers, abandons debit fee plan
11/02/2011 12:00 AM
11/02/2011 5:39 AM
NEW YORK — Bank of America Corp. is scrapping its plan to charge a $5 monthly fee for debit card purchases after outraged customers threatened an exodus.
The about-face comes as customers across the country petitioned the bank and mobilized to close their accounts in favor of credit unions and community banks. The outcry prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel trial tests of their own debit card fees.
Bank of America reversed course after listening to an outcry from its customers. Anne Pace, a spokeswoman for Bank of America, declined to say whether there was a spike in account closures following the September announcement that it would start charging the fee early next year.
The industry-wide retreat on the debit card fee is a rare victory for consumers who have been dealt an onslaught of new and higher checking account fees in the past year.
It's still too early to say whether the bank's gross miscalculation of consumer sentiment will have a lasting impact.
"This is Bank of America's Netflix moment," said Mark Schwanhausser, a banking analyst with Javelin Strategy & Research. "It misjudged what consumers would bear. It was the wrong fee at the wrong time."
The bank's actions echo the reversal of Netflix to split its DVD-by-mail and streaming video services after vehement consumer complaints.
The prospect of a debit card fee struck a nerve with customers because it's about accessing their own cash at a time when consumers are trying to cut back on borrowing, he said.
Unlike Chase and Wells Fargo, Bank of America's announcement that it would start charging customers a monthly debit card fee came without any testing in the marketplace.
The high-profile retreat could signal that the specter of a debit card fee has been extinguished for the time being. But it doesn't mean customers won't continue to see higher fees elsewhere.
This past spring, for example, Bank of America raised the monthly fee on its basic checking account to $12, from $8.95. The Charlotte, N.C.-based bank is also testing a new menu of checking accounts with monthly fees ranging from $6 to $25 in select states.
Other, smaller fees may be nicking away at customer accounts as well. In September, the bank instituted a $5 fee to replace debit cards, with overnight rush delivery costing $20. Both services had previously been free.
Chase and Citi also hiked fees on their basic checking accounts this year, to $12 and $10, respectively. Chase said it will end a test in Georgia of a basic checking account that charged an even higher $15 monthly fee, however.
In rolling out such unwelcome changes, banks have largely blamed a new federal regulation championed by Sen. Dick Durbin of Illinois. The law, which went into effect last month, caps the amount banks can charge merchants whenever customers swipe their debit cards.
JPMorgan has said it would lose $300 million each quarter as a result of the regulation; Wells Fargo said it would lose $250 million a quarter.
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