Weeks after stirring up consumer outrage with a proposed $5 monthly fee for debit card usage, Bank of America is now following its big bank colleagues by abandoning plans for the fee. Throughout the debit card fee saga, smaller financial institutions have seized the opportunity to attract new customers by comparing themselves in a favorable light to BofA. For the most part, they still compare quite favorably, even after the debit card usage fees have disappeared.
The entire episode has undeniably been a PR disaster for Bank of America, and it’s not necessarily over for the bank. In a recent survey, 60% of independent banks had seen a spike in new accounts since BofA first proposed the debit card fee. How did they bring in new business? Several small banks, credit unions, and online banks have gotten creative in their efforts to set themselves apart from the big bank competition, highlighting the absence of fees, as well as new incentives and bonuses for account openings.
One credit union, for instance, has promised free checking and no debit card fees for life, while another announced it will pay customers 15¢ each time their debit card is swiped.
The Washington Post reports that credit unions all over the country have pounced on the opportunity to attract customers made unhappy with the possibility of new fees from the big banks. In many cases, credit unions haven’t needed to do all that much to bring in new clients. An executive for the Mid-Atlantic Federal Credit Union told the Post:
“Bank of America drove more members into our branches than I ever could.”
Even so, small financial institutions around the country stepped up with promotions and guarantees to give would-be customers extra incentive to cut ties with big banks—perhaps this Saturday, which has officially been dubbed “Bank Transfer Day.” One of the most intriguing examples, which is still being offered even after BofA has dropped its debit card fee, comes from the online financial institution Everbank.
In addition to its usual perks—no monthly account fees, a promise to keep interest rates in the highest 5% of leading banks—Everbank is now offering a bonus cash reward for new customer signups that occur by November 30. The bonus is similar to those offered to attract new credit card customers, and the amount for the reward was chosen by Everbank in completely non-coincidental fashion: $60. That just so happens to be the amount you would have paid Bank of America for the privilege of using a debit card for 12 months, had BofA gone through with its plans ($5 x 12 months = $60).
Bear in mind that an Everbank account doesn’t work for every bank customer. The Yield Pledge Checking Account—the kind that comes with the $60 signup bonus—requires a minimum initial deposit of $1,500, and a balance of at least $1,500 must be maintained through early 2012 in order to receive the cash bonus. There is other fine print that makes Everbank not the most customer-friendly of institutions: Namely, that online bill pay is free only for customers with a $5,000 balance. With a balance under $5,000, bill pay is still available, but comes with a $8.95 monthly fee.
Other customer-friendly online bank accounts have no such requirements. ING Direct’s checking accounts, for instance, have no minimum balance requirements whatsoever, and bill pay is always free. By the way, ING Direct account openings have also skyrocketed since news broke about fees from Bank of American and others.
Perhaps Bank of America’s biggest mistake in this debacle is that it gave customers good reason to shop around for other banking options. Many of these customers, undoubtedly, like what they’ve found in the alternatives, no matter if BofA has a debit card fee or not.