Bank of America to Charge $5 a Month For Debit Card Use Next Year

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Wells Fargo and Chase each stuck a toe in the water with the announcements that both were testing a $3 fee for debit card usage in limited markets. Bank of America, on the other hand, just cannonballed into the pool with the announcement that it will charge most of its deposit account customers a $5 fee for debit card usage starting sometime next year.

The fee will be assessed for each month customers use their debit card for purchases; it won’t apply to online bill pay, person-to-person transfers or ATM use. According to the Wall Street Journal, “The fee will apply to various consumer checking accounts but will not apply to customers in certain premium accounts.”

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In an email, BofA spokeswoman Anne Pace said the fee applies to MyAccess, Essentials, eBanking and Enhanced accounts. Customers with Platinum Privileges, Premium and Advantage accounts won’t have to pay the fee; these are all accounts aimed at customers with five-figure balances or other big-ticket ties to the bank like a home mortgage. “In addition, Wealth Management/Merrill Lynch and US Trust clients will not be charged the fee,” she said via email.

Other than not using your debit card for purchases, there’s no way to get out of the fee if you have one of the aforementioned accounts. In the past, banks have exempted customers from monthly service fees in return for arranging direct-deposit or keeping a minimum balance of maybe a thousand bucks or two. That’s not the case here.

However, Bank of America wouldn’t reveal what percentage of its accountholders stand to be affected by this fee. Banking consultant Bert Ely thinks it will be significant. “My sense is that most of their customers would be impacted by this,” he says.

The bank is taking a big risk, not only with how customers will react, but what its competitors will do. “It’s going to be interesting to see how other banks respond to this, and to what extent others follow the lead,” Ely says. “B of A may find itself in a situation where it has to back off.” If other big national and regional banks don’t hop on the bandwagon but use their own lack of debit fees as a way to differentiate their brands and grab market share, Bank of America’s gamble could backfire. “I would not be surprsied if we don’t see some modification of [the fee] before it takes effect,” Ely says.

WSJ reports that the bank stands to lose $2 billion a year beginning in October due to new caps on how much debit card issuers can charge merchants who accept the cards for transactions. Bank of America is the country’s biggest bank by asset size, but it’s struggled lately, announcing plans to lay off some 30,000 employees as part of a plan to save $5 billion annually. It’s also contending with lawsuits on everything from overdraft fees to mortgage-backed securities. It remains to be seen if this cannonball will boost its bottom line or turn into a belly flop.

(Updated: 5:02 p.m.)

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