November 4, 2011 > Bank of America backs down on $5 debit card fee
Bank of America backs down on $5 debit card fee
By Candice Choi, AP Personal Finance Writer
NEW YORK (AP), Nov 01 - Bank of America Corp. is ending its plan to charge a $5 monthly fee for debit card purchases after outraged customers threatened to take their money somewhere else.
The change at the nation's second largest bank comes as customers across the U.S. mobilized to close their accounts in favor of credit unions and community banks. The outcry prompted other major banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to cancel trial tests of their own debit card fees.
Higher fees have become a fact of life, but this one touched a nerve because it hit so close to home; many Americans have come to rely on debit cards to manage essential expenses such as groceries and gas.
There's also lingering resentment - which has surfaced in recent weeks with the Occupy Wall Street movement - over the role that banks played in the 2008 financial meltdown.
Bank of America said it reversed course after listening to customers. Anne Pace, a spokeswoman for Bank of America, declined to say whether there was a spike in account closures following the September announcement that it would start charging the fee early next year.
The banks have countered by saying that efforts in the past two years to regulate the industry have forced them to raise or introduce new fees to stay profitable. That made the march to higher fees seem almost inevitable - and makes the rare victory by consumers in this case even more remarkable.
``When I heard about the fee, it was the last straw for me,'' said Molly Katchpole, whose online petition urging Bank of America to drop the debit fee captured more than 300,000 signatures. ``I'm living paycheck to paycheck and one more fee was just too much.''
Katchpole said she already closed her account and moved her money to a community bank. She said Bank of America's decision won't win her back.
Bank of America is dealing with other troubles, including the potential for large mortgage-related settlements to drain its capital and plans to cut 30,000 jobs to reduce expenses. Last quarter, the company lost its standing as the nation's largest bank by deposits to Chase.
The news of the debit card fee meanwhile drew criticism from even President Barack Obama and sparked a movement called ``Bank Transfer Day'' that urged customers to close their accounts by this Saturday.
Bank of America's announcement that it would start charging customers a monthly debit card fee came without any testing in the marketplace.
Pace, Bank of America's spokeswoman, said the decision was based on internal customer surveys. She declined to detail the nature of those surveys.
In rolling out unwelcome changes, banks have largely blamed a new law, which went into effect last month, that caps the amount banks can charge merchants whenever customers swipe their debit cards.
JPMorgan has said it would lose $300 million each quarter as a result of the regulation; Wells Fargo said it would lose $250 million a quarter.
For now, Bank of America said it doesn't have any new fee hikes in the works to make up the lost revenue.
``We will continue to initiate moves that mitigate loss revenue,'' Pace said.