Barely 72 hours later, it seems that Bank of America’s decision to charge customers $5 a month to use their debit cards is rapidly becoming a New Coke-level blunder. Consumers have taken to the blogosphere in droves to vent their displeasure, and the bank’s already-battered stock dropped by more than 3.5 percent on Friday.
Bank of America’s website was plagued with glitches through most of the day on Friday, and bloggers report continued sporadic outages throughout the weekend. The bank didn’t immediately elaborate on the cause of the technical problems. The timing led some to speculate that hackers could be to blame, although no group had claimed responsibility as of midday Sunday and the bank denied hacker involvement. “It wouldn’t be the first time a hacktivist group used a denial of service attack to express their displeasure over a company policy,” a fraud expert told a bank industry trade publication on Friday.
When TIME Moneyland posted a poll asking Bank of America customers how they planned to respond to the fee announcement, roughly 75 percent of nearly 1,000 respondents said they’d switch banks, and a number of them took to the comments section to elaborate.
Yes, switching banks is a hassle, especially if you have automatic bill pay or direct deposit, but a ticked-off consumer is also a motivated consumer. Research shows that roughly two-thirds of people who say that they plan to switch banks do, according to Michael Beird, director of banking services at J.D. Power and Associates.
Our poll also found that 11 percent of respondents said they’d switch to credit cards to avoid the fee. Ironically, this is the outcome that would benefit banks the most, since they’re paid more by merchants for credit card transactions, and there’s the potential that customer will spend more than planned and have to revolve a balance. Nearly as many, 8 percent, said they’d switch to cash, while a relative handful (3 percent) said they’d go back to using paper checks.
J.D. Power also asked consumers which method of payment they would use for everyday purchases if a debit card was unavailable in its 2011 Retail Banking Satisfaction Study, and found that the highest percentage, 40 percent, said they’d switch to paper checks. It’s more expensive for banks to process paper checks than debit transactions, so this is an outcome Bank of America probably hopes to avoid. “If consumers banded together and switched to paper [checks], I think it would be a very telling impact,” Beird says.
For customers, the question is: Can they switch to a financial institution that doesn’t charge fees? For instance, they could dodge the debit fee by transferring to Citi, which has said it won’t charge for debit card use. On the other hand, Citi just significantly increased its minimum balance that customers must keep in their checking account to avoid a monthly maintenance fee.
More fees will probably be a way of life for bank customers, at least at larger institutions. Yahoo! Finance writer Dan Gross points out that this has the benefit of being more transparent for customers than the plethora of hidden costs and “gotcha” fees that were pervasive prior to financial reform. And, he notes, charging customers fees for services like debit card use is arguably a better business model — for banks as well as for society at large — than creating and trading complex derivatives that can threaten the entire country’s financial stability if they collapse.
“There are 7,000 banks in the United States, and if somebody else offers a better deal, people can go to that,” Buffett said today on CNN. “It’s just like you can change channels on television.”
It’s an apt analogy, and if consumers want to change the channel and bank with a smaller institution that didn’t dive headfirst into risky, unsustainable business practices and now doesn’t have to nickel-and-dime its customers to make up for lost profits, that’s their call.