UPDATE: Bank of America has bowed to public pressure and will scrap plans to impose new usage fees on customers who use their debit cards to make purchases.
The move follows a backlash from consumers, investors and lawmakers who were quick to voice their displeasure with the possibility of new fees. At the time of the original announcement, other major banks were expected to follow BoA's lead when it came to the new fees. But most major U.S. banks thought better of it after watching the reaction to Bank of America's announcement.
Here's the statement from co-COO David Darnell (via CNN): "We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee. 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."
UPDATE Friday, Oct. 28: After watching Bank of America take a beating from customers, investors and politicians over its plans for a new debit card fee, most of its U.S. banking brethren seem to have thought better of imposing similar fees.
The Wall Street Journal took a quick tour of the banking landscape Friday, and reports that among the major U.S. banks that have recently ruled out following BoA’s lead are: U.S. Bancorp, Citigroup, PNC Financial Services and KeyCorp, among others. While none said explicitly that the decision was related to the very public pummeling that Bank of America took, it’s fairly clear that the public outcry didn’t fall on deaf ears.
"Our customers said that would be a massive source of irritation for them," Citigroup’s Stephen Troutner told the paper. "Any time you hear that kind of emphatic feedback from customers, you've got to listen to them."
Still, Bank of America customers will still be able to vent to those loyal to a handful of other banks. SunTrust Bank is also planning on tacking on a $5 monthly fee on some debit-card users, Regions Financial is charging $4 a month on some accounts, and Wells Fargo is currently testing a $3 monthly fee in five states.
UPDATE Friday, Sept. 30: And let the backlash begin.
Bank of America is getting pummeled by investors and customers after the bank announced Thursday that it will begin charging debit card users $5 a month next year when they use the card to make purchases, the Washington Post reports.
The bank saw its stock fall more than 2 percent in late-morning trading Friday. The drop comes in what has already been a terrible second quarter for Bank of America, which has watched its shares fall almost 44 percent, making it by far the worst-performing stock in the Dow Jones industrial average over that time period.
In addition to its Wall Street woes, the bank is also facing angry customers, among them Fox Business Network’s Gerri Willis, who cut up her debit card on air Thursday evening.
"Right here, right now, I’m going to show Bank of America what I think of their fees," she said before using a pair of scissors. "That $5 fee may not seem like a lot, but it’s the principle of the thing — more and more coming out of my pocket."
Of course, BoA isn't the only bank that is looking to offset revenue losses expected from new limits on how much it can charge merchants when customers use debit cards to purchase goods and services.
The New York Times reports: "Wells Fargo and Chase are testing $3 monthly debit card fees. Regions Financial, based in Birmingham, Ala., plans to start charging a $4 fee next month, while SunTrust, another regional powerhouse, is charging a $5 fee."
POSTED Thursday, Sept. 29: Bank of America will begin charging customers $5 a month next year for using their debit cards to make purchases, the company announced Thursday.
The move comes as U.S. banks are seeking ways to increase their revenue in the wake of new regulations on the financial industry. Starting in October, in addition to existing caps on overdraft fees, banks will face a limit on how much they can charge merchants when customers use debit cards to purchase goods and services. The new provision is the result of the Dodd-Frank banking reform bill, which President Obama signed into law last year.
In the past, fees from debit cards have provided significant revenue for American banks, generating $19 billion in 2009, according to the Associated Press reports. But the new limits on these fees could threaten this reliable cash flow. So instead the banks are expected to shift the fees from the merchants to the customers.
"The economics of offering a debit card have changed," Bank of America spokeswoman Anne Pace told Reuters on Thursday. Pace also tried to offer some consolation to potentially disgruntled debit-card users, explaining that customers won't be charged if they only use their cards at an ATM.