Backstabber Report

Bank of America $5 Debit Card Fee

Bank of America, one of the bail out recipients of taxpayer money, is thanking their customers by instituting a $5 monthly fee for using a debit card to make purchases. That is, you will be charged $5 for using your own money. If you swipe your debit card only once during the month, a McDonalds $1 menu item will end up costing you $6.

Consumers are outraged that banks are now charging monthly fees if they use their debit cards.

Bank of America will begin charging this $5 fee in 2012.  Chase and Wells Fargo are also putting their toes in the water to see how severe the lash back will be. Much like ATM fees had people bitterly complaining when introduced, the public eventually became accustomed to the occasional gouging from an ATM not in their banks network. The debit card fee is no doubt being tested the same way.

Will Bank of America customers really move their accounts to another bank? Some might, but not the significant number required for BoA to rethink the new fee. Once this is set in place you can expect all banking institutions to follow the leader.

The common explanation from banks who are charging this new fee is that they are losing billions of dollars in revenue from the Durbin Amendment which basically cut the interchange fee on debit card transactions in half. Banks feel they need to make up for this loss of revenue, and charging customers to use their debit card is one way to generate revenue.

But could there be another reason for a monthly charge on debit cards? Are banks trying to indirectly force consumers to use credit cards because they are much more profitable to these financial institutions?

If consumers choose to now go without a debit card in order to avoid these monthly fees, consumers will turn to other forms of payment, and credit card usage could increase dramatically. That would be great news for banks because credit cards are a much greater profit center.

Credit cards are not covered under the interchange fee regulations that went into effect on October 1. These regulations only affected debit card purchases. While the interchange fee varies depending upon the volume of the retail outlet, retailers still have to pay the banks approximately 2% of any credit card transaction, including tax. This is much higher than the amount a bank is paid for a debit card transaction. So banks want you to use a credit card when you make your purchases.

The only way to make the banks understand that such debit card charges will not be tolerated is to take your business away from those banks imposing the fee and into banks that do not. If the public accepts this $5 fee as just another “cost of doing banking” then every bank and financial institution will quickly add the fee to their customers.