Updated Oct. 31, 3:30 p.m.
A month after Bank of America announced plans for a widely derided $5 monthly fee for debit card use, BofA, Wells Fargo and Chase are all backing off their plans to charge for debit card use. It’s a rare about-face prompted by a groundswell of consumer anger. Will it placate furious customers, or is the response too little, too late?
Citing unnamed sources at the bank, the Wall Street Journal says Chase will stop testing a $3 monthly debit card fee next month. Wells Fargo went a step further, announcing yesterday that it was immediately abandoning its test of a $3 debit card fee in five states.
On Monday, regional bank SunTrust announced it, too, would scrap its $5 monthly debit card fee, and would refund all of the customers who had been charged the fee since it was implemented in June. A bank spokesman was quoted by MarketWatch.com as saying the refunds will be processed within 30 days.
Bank of America is keeping its fee, Reuters says, also citing unnamed sources, but it will offer consumers more ways to dodge the fee. Conditions like a minimum balance (presumably less than the $20,000 current requirement) or getting direct deposit are likely to be the kind of exclusions Bank of America offers, similar to those for customers to avoid monthly account maintenance fees.
The limited market tests of $3 debit card fees being conducted by Wells Fargo and Chase slid under the radar of most consumers, but when Bank of America announced its $5 debit card fee — with no options for most customers without $20,000 in their accounts to avoid the fee aside from never using the card — blogs and social media sites exploded with outrage.
People felt vowed to switch banking institutions, petitions and even a “Bank Transfer Day” set for November 5 attracted considerable followings online, especially after Bank of America announced profits of $6.2 billion last quarter. The anger over fees is part of a broader wave of antibank sentiment fueling the Occupy Wall Street protests that have spread across the United States and even overseas.
According to Reuters, using Bank of America credit cards might also be a way consumers could avoid the fee. This seems very likely; given that banks still collect high interchange fees from merchants who accept credit cards, it’s in their interests to have consumers use credit rather than debit cards. (If a customer uses a debit card but chooses the “credit” option on the checkout keypad, this is still considered a debit transaction.)
Banks could also make up the revenue lost from debit interchange fees by increasing monthly account fees, as Citibank recently has done. Reuters says Bank of America is introducing new account types next year with monthly fees that could go as high as $20.
Will abandoning the debit card fees be enough to keep customers from switching banks? Banks are obviously hoping this is the case, although it’s also possible that they’ll create new fees in the future and provoke the anger of their customers once again.
Customers of these banks: Will these announcements prompt you not to switch financial institutions? Will you stay, or have the big banks burned their bridges?