The recent announcement by Bank of America to begin charging monthly debit card fees again raised a significant amount of chatter and grumbling among the media and consumer-advocate sources. Not only is the timing a sour point of contention given the economy and hard times for many, the choice to do so clearly represents a response to the federal government capping how much banks can charge for debit card use in transactions.
Bank of America originally charged a monthly fee on its account holders in the late 1990s for use of its cards outside its network, collecting revenue monthly from normal living transactions of millions. The bank was no different in this capacity from others; Wells Fargo and Citibank charged the same fees from their customers as well at the time.
With the boom of the 2000s and a proliferation of online banks creating significant competition, the major players like Bank of America began to do away with their fees to become more attractive again to consumers. Free checking accounts with no fees became the trend for years up to 2011.
Now, with recent federal regulation placing a limit of approximately 24 cents per transaction on how much banks can charge for transactional swipes, Bank of America and other big banks have decided to recoup their revenue streams through direct account charges instead.
The new fee works as a flat monthly charge on the Bank’s customers. Irrespective of what stores or uses the ATM card works with, the fee is charged on the customer to cover miscellaneous support costs.
Some fees can be offset by carrying a larger balance in the consumer bank account or by signing up for more services and bundling the existing account with them. However, the specific options for Bank of America depend on the bank’s details and the customer’s given individual situation with the Bank.
The trend of the new charges likely won’t be going away anytime soon. As Bank of America and other banks see their longtime revenue streams become curtailed by government regulation in overdraft fees and transactions, the banks will push into other areas to recover losses. In many cases, the new fees are simply rehashing of charges Bank of America and others used decades ago on their customers.
Customers can protect themselves from too many account charges by keeping multiple bank accounts. This allows a consumer to retain the ability to move if one bank needs to be dropped due to becoming too expensive. Further, if all you need is a credit card/ATM access to your account, many online banks are far more competitive and some offer paper checks now as well.
Alternatively, a number of credit unions exist in most urban areas that provide far more competitive services at lower costs. In many cases, there’s a credit union for just about every major labor organization that exists. Not only are the account charges cheap if not outright free with payroll deposit, they are far lower than big bank fees. Additionally, credit unions are just as safe as banks in terms of risk, being insured by the federal government.
Sources:
“Wall Street Journal”; How Debit-Card Fees Ruin Banking Relationships; Karen Blumenthal; October 2011.
“Forbes”; What the Bank of America Debit Card Fees Can Teach Us About Healthcare Reform; E.D. Kain; October 2011.
“Wall Street Journal”; Banks Plan New Fees for Using Debit Cards; Andrew Johnson; September 2011.
Time Magazine; Three Alternatives to Paying Big Bank Fees; Brad Tuttle; October 2011.
Author was a BofA consumer accountholder from 1995 to 1998.