Bank of America drops plans for debit card fee
Consumers protested new charges through social media
Savanna Elligson, left, and Dwayne Somerville, right, both of Baltimore, wait to use Bank of America's ATM machine in Lexington Market. They were glad to hear that the bank was dropping the proposed $5 monthly fee for using debit cards for purchases while (Kenneth K. Lam / The Baltimore Sun / November 1, 2011)
The move — which came after some banks had backed away from similar fees — is seen as a major victory for consumers, who stood together against what they saw as an unfair fee to access their own money.
"A lot of people do petitions," said Catherine Anderson, 30, a Bank of America customer in Baltimore. "Sometimes they work; sometimes they don't. It depends on the issue. But with this one where there was a sense of community … this was definitely a hot topic that needed to be addressed."
Bank of America, the largest bank in Maryland, planned to adopt the fee next year to make up for lost revenue, after the federal government capped what banks can charge merchants to process debit card transactions. Other major banks were expected to follow suit.
But the fee, unlike some others, touched a nerve with consumers. Experts said the swift reaction reflected consumers' frustration in dealing with foreclosures and high unemployment, even as banks appear to have recovered from the recession with the help of a taxpayer bailout.
"I wanted to drop" Bank of America, Savanna Elligson of Baltimore, a longtime customer, said Tuesday. Now that the company has dropped the plan, she plans to continue banking there.
The consumer victory is likely to be short-lived. Finance experts predict banks will make up the lost revenue by adding other fees.
Still, the consumer backlash against the debit-card fee was quick, and so was the reaction from some banks.
Wells Fargo & Co. and JPMorgan Chase, which were testing similar fees, abandoned plans to adopt them last week. SunTrust and Regions Bank announced this week that they were rescinding their debit card fees and refunding the money to customers.
Bank of America initially appeared willing to give customers more opportunities to avoid the fee, but Tuesday morning it backed away entirely.
"Bank of America backed down because it was a fee too far; it was a fee too high," said Ed Mierzwinski, a program director at the consumer advocacy organization U.S. Public Research Group.
In announcing its decision, Bank of America cited customer concerns and a changing competitive marketplace.
"We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee," David Darnell, co-chief operating officer said in a statement. "Our customers' voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so."
The National Foundation for Credit Counseling released the results of an online poll Tuesday, which found that nearly two-thirds of the 2,400 respondents said they would change financial institutions to avoid a debit card fee.
Indeed, competitors had been quick to seek advantage from what was viewed as a public relations blunder by some major banks. Credit unions, community banks and online institutions that do not charge debit card fees have been touting themselves as an alternative — similar to Southwest Airlines launching its "bags-fly-free" ad campaign after competitors adopted baggage fees to the outrage of many travelers. Southwest doesn't charge for the first two bags.
John Ulzheimer, president of consumer education for SmartCredit.com, said banks probably were surprised by the uproar.
"People don't generally complain for very long or very loud when someone puts a new annual fee for $79 on a credit card," he said. "But when you charge to get access to your own money, that's when people get really angry at you."
Ulzheimer said banks were wise to back off the unpopular fee, though consumers are still likely to pay a price.
"All [banks] have to do is increase ATM charges by a quarter or nickel" to recoup that lost revenue, he said. "A dollar is a dollar regardless of where it comes from. If it comes from a place that makes me less angry, that's a win for the bank."