Apparently, consumers have a breaking point — a $5 monthly debit-card fee.
Since news broke late last month that Bank of America planned to introduce such a fee next year, the uproar hasn't abated.
Legislation was introduced in Congress to make it easier for consumers to switch accounts. A "Bank Transfer Day" campaign has been organized on Facebook to encourage consumers to switch to a nonprofit credit union by this Saturday. And now some major banks are backing off debit-card fees.
SunTrust became the latest, announcing Monday that it would eliminate its $5-a-month debit-card fee on its "Everyday Checking" account starting Wednesday. Additionally, SunTrust promised to reimburse customers who have been paying the fee since it was introduced in June.
In a way, Bank of America has done us a favor.
Consumers might gripe about fees or other practices by their bank, but generally they stay put because switching can be such a hassle. But the prospect of debit-card fees has prompted many consumers to reassess their institutions. Some will stick with their bank, but others will take the leap to another institution that's better for them financially. And, in any case, a review of your banking relationship is healthy.
The big banks are counting on customers not to flee once they consider the banks' wide range of products, as well as the broad network of branches and ATMs that large institutions offer.
"Customers who are considering a move to a different institution are encouraged to shop their own bank first," says Carol Kaplan, a spokeswoman with the American Bankers Association. "Just as cable and phone companies have different plans to choose from, your bank may have a new product that better meets your needs."
Nevertheless, recent weeks have been good for credit unions.
Bill Cheney, chief executive of the Credit Union National Association, says that traffic to http://www.aSmarterChoice.org, a website that helps consumers find a credit union, jumped eight-fold immediately after news of Bank of America's debit-card fee — and that interest remains high. And credit unions across the country, he says, report they are opening more accounts than a year ago.
Rob Windsor, chief executive of First Financial in Lutherville, said the federal credit union opened as many as 60 accounts in the past month, or 30 percent more than usual. New customers, he says, often cite the Bank of America fee in their decision to switch.
It certainly was the last straw for Kristen Christian, a 27-year-old Californian who launched a Facebook campaign called Bank Transfer Day to get bank customers to switch to a credit union by Saturday. Christian says she will be closing the Bank of America accounts she has had for 13 years. The Facebook page has more than 32,000 fans.
Greg McBride, senior financial analyst with Bankrate.com, says in a climate where every dollar counts, consumers have been poised to bolt over fees.
"Money-savvy consumers won't stand for higher fees when they know that better alternatives exist in the marketplace," he says.
Bankrate surveyed more than 1,000 American consumers in March and found that 64 percent said they would consider changing financial institutions if their checking account fees went up. And those most likely to say they would jump ship, he says, were affluent customers — the kind that institutions want to keep.
It could be that some of those well-heeled customers already have abandoned their banks, which is why some institutions are now pulling back on debit-card fees, McBride says.
Last week, Wells Fargo announced it was canceling a $3 monthly debit card fee that it was testing in five states. A source familiar with JPMorgan Chase's plans said that after testing a series of fees, including a $3 monthly debit card charge, the bank decided against a debit-card fee.
And Reuters reported last week that even Bank of America was weighing changes to its proposed debit-card fee so that customers would have more chances to avoid it. Bank of America has declined comment.
Ben Woolsey, a marketing director with CreditCards.com, says consumers responded to higher credit-card fees by switching to a debit card that allowed them to avoid interest and late fees. Now that debit cards might come with fees, he says, "a lot of consumers are saying, 'I give up.' "
"This is one fee that most consumers just really have a problem with," Woolsey says.
Source: CreditCards.com survey of 1,005 adults
Consumers weigh in on debit card fees
Asked how they would respond to a new debit card fee:
•81 percent say they would pay with cash
•78 percent would change to an institution that doesn't have a fee
•68 percent would stop using debit cards
•42 percent would use credit cards