The WSJ is reporting today that Bank of America has pulled the plug on its planned $5 monthly debit card fee. It's no real surprise considering the negative press and the online uproar. Online sites, social networks, and message forums have been full of customer complaints about the fee as well as customer threats to close accounts and leave the bank because of it. This, and the fact that competitors such as Chase and Citibank decided not to levy a fee, forced Bank of America's hand.
I suspect the bank made the decision based on two factors:
- Being the lone major bank with the fee would put it at a competitive disadvantage in claiming its fair share of checking accounts. Not only did the other major banks back away from a fee, but startups such as PerkStreet Financial (a financial company that offers a debit card with no fee and 2% cash back) and smaller banks and credit unions were capitalizing on the news.
- The negative public sentiment was more than the battered bank wanted to deal with. Since the financial crisis and the purchase of Countrywide, Bank of America has been contending with a string of bad news related to losses, government assistance, subprime loans, mortgage modifications, and more.
The fee came in response to the Durbin Amedment, which lowered the amount banks could charge merchants when a customer uses a debit card. The Amendment is estimated to cost banks billions of dollars per year in lost revenue.
As banks try and recoup this revenue, look for more account and service fees.