Bank of America to Charge $5 Monthly Debit Card Fee
The nation’s largest bank will begin charging customers who use their debit cards to make purchases a monthly fee starting early in 2012, Reuters reports.
Bank of America (BOA), whose card services division reported $1.9 billion in credit and debit card fee income for the second quarter of 2011, is scrambling to find new ways to increase profits since government regulations enacted in reaction to the ongoing financial crisis have eroded earnings as of late. To that end, the North Carolina-based bank will begin charging customers who use their debit cards to make purchases a $5 monthly fee beginning early next year.
Bank of America’s wealthier clients, those with premium or platinum accounts linked to BOA-acquired Merrill Lynch brokerage, will not have to pay the $5 monthly fee.
“The economics of offering a debit card have changed,” Bank of America spokeswoman Anne Pace coldly declared as she announced the new fee.
And they have, but you shouldn’t shed a tear for the big banks. BOA’s deposits unit has reported a 34% drop in fee income, and the card services division has seen a 23% decrease in income, but these two units have still managed to pull in a combined $2.9 billion in the second quarter of 2011. Overall, BOA incurred a second-quarter net loss of $8.8 billion.
Part of BOA’s problem is that the Dodd-Frank Act’s Durbin amendment, which takes effect on Saturday, limits how much banks can charge for processing debit card transactions to 21 cents, down from an average of 44 cents. This could cost banks billions in lost fees. Bank of America sees instituting debit card fees as part of the solution to this problem, and other banks like Wells Fargo, JP Morgan Chase and SunTrust are in the process of planning or instituting monthly debit card fees.
Others banks are balking at such measures. Citigroup announced it would buck the trend and resist enacting debit card fees, which one of the bank’s executives called “a huge source of irritation.”
Senator Dick Durbin (D-IL), who has championed interest rate and fee limits, was incensed by BOA’s latest announcement. “Bank of America is trying to find new ways to pad their profits by sticking it to its customers,” he said in a statement quoted by Reuters. “It’s overt, unfair, and I hope their customers have the final say.”
One way in which they could have that final say is by bidding farewell to mega-banks altogether and opening an account in a community bank or local credit union. “Invest in Main Street, not Wall Street,” implores the ‘Move Your Money Project,’ which also provides a list of community banks and credit unions across America.
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