Bank of America Cancels $5 Debit-Card Fee

After looking around and finding itself alone, Bank of America is canceling its plan to charge $5 per month for customers who use their debit cards to make purchases.

The plan enraged consumers.  Thousands said they had canceled or planned to cancel their Bank of America accounts.  

BA's surrender comes after SunTrust and Regions Banks joined Chase and Wells Fargo, which earlier canceled their plans to charge for debit cards.

“Consumers have the power to make the big banks back down from unfair practices if they raise their voices and vote with their feet and their dollars,” said Norma Garcia, manager of Consumers Union’s financial services program.  “In the end, Bank of America understood that it risked losing too many valuable customers by charging an unfair debit card fee.”

The fee, announced a month ago, was intended to make up the revenue Bank of America thinks it will lose from the new lower swipe fees. But it set off a firestorm of protest from customers who had had just one fee too many from an institution many believe is still in existence only because of the American taxpayer.

Consumer backlash

“President Obama gave those banks billions of our tax dollars and they turn around charging us more fees,” said Mary, of Decauter, Ga. “This is right down illegal and Bank of America will fall hard. They always say that the bigger they are, the harder they fall. I can't wait for that day.

“As the fees go up at the bank, customer service is declining,” Lisa, of Lillington, N.C., told ConsumerAffairs.com. “Is it only important to take care of customers with large sums of money and not the middle class? I will definitely be moving to another bank that takes care of all the account holders. If you are looking for a new bank and don't want to pay large fees for your savings account and checking accounts, do not chose this bank.”

Apparently the consumer outrage resonated in the executive suite. Bank of America today issued a brief statement declaring it would not implement its announced debit card fee, citing the customer feedback it had received.

Bank of America blinks 

"We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee," said David Darnell, co-chief operating officer. "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 ill-fated debit fee was a result of this year's long-running battle between banks and retailers over how much lenders should charge for each debit card transaction. In the end, retailers won out, with the Federal Reserve lowering the “swipe fee” from 44 cents to 24 cents. 

“The public backlash over debit card fees should serve as a big wake up call to banks that they can’t arrogantly take their customers for granted,” said Pamela Banks, senior policy counsel for Consumers Union. “While banks may come back with other fees in the future, they’ll be gauging public reaction carefully.  Consumers should be on the lookout for new fees and remember that if they’re not happy with how they are being treated, they should shop around for a bank or credit union that can offer them a better deal.”

Retailers celebrate

The Retail Industry Leaders Association (RILA), which lobbied hard for the lower rate, declared Bank of America's retreat was “proof-positive” that consumers will be the winners with the lower swipe fee.

“Bank of America and its big bank peers are no longer free to fleece merchants and consumers at will,” said Katherine Lugar, RILA executive vice president of public affairs. “This outcome is just what consumers deserve, what reform advocates predicted and what we will fight to extend to the credit card market.”

The action by Bank of America follows decisions by competitors to drop customer trials of the new fees. SunTrust Banks Inc. and Regions Financial Corp. also said they will stop charging customers for debit-card transactions.