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Bank of America Charging $5 Debit Card Monthly Fee

This article was written by in Banking. 15 comments.


Last month, I noted that Wells Fargo was to begin testing a $3 debit card monthly fee in some areas of the country. Since the recession, banks are looking for more ways to generate profits from depositors. Historically, banks turned deposits around and approved loans for borrowers at higher interest rates than what was paid on deposits, but with loan interest rates remaining low, the financial industry is not satisfied with current profits.

More recently, banks have benefited from swipe fees or interchange fees, where card issuers receive a small payment for every transaction. These fees have been a significant source of revenue for banks; in fact, the cost for banks to provide merchant services is significantly less than the revenue from fees. As a result, new regulations, intended to help small business owners who absorb the cost or pass it onto customers in the form of higher prices, enact limits to interchange fees. The most obvious solution to a squeeze on revenue from one source is to find another willing source.

In this case, banks are beginning to charge depositors directly.

Bank of America is initiating a new monthly fee of $5 for debit card use. Regardless of whether a Bank of America customer uses a debit card in “credit mode” (usually a signature-based transaction, though in some situations signatures aren’t necessary) or in “debit mode” (a PIN is required), as long as he or she has one transaction in a month, the bank will deduct $5 from the account at the end of the period.

While there is something to be said for customers paying a service provider — a bank — for the services it provides — immediate access to their money stored safely in checking and savings accounts, this isn’t the model for savings and checking account access the country has come to accept over the past century.

The good news is customers still have choices.

Unfortunately, many Bank of America customers will continue blissfully unaware that there have been any changes. Some will notice the new $5 fee after receiving the first statement after the debit card fee has gone into affect, and some will notice months later — or perhaps never. Perhaps this is justified punishment for not managing finances closely. Some will know about the fee but not care enough to make any changes. $60 a year on a $30,000 annual income is not a significant expense at 0.2% of income.

If, however, you keep an average of $1,000 in your checking account, a fee of $60 a year is 6% of your balance. That is an insane fee considering the benefit the bank provides. You’re better off — much better off — with any alternative.

  • Carry around cash. While this will save money from a few different perspectives, it is not an ideal situation for everyone. If you regularly make a lot of transactions and need to carry a significant amount of cash on your body at all times, you’re putting your cash at risk, whether the risk comes from a capacity for misplacing your wallet or getting mugged. Another benefit is that on average people spend less with cash than they would with plastic due to the psychological effect of taking bills from your wallet and giving them to someone else.

    One potential drawback, especially for spenders who are aware of the psychological disadvantage and work to control their spending with plastic, is they lose the benefit of receiving statements outlining their spending. For someone who tracks her finances, that might mean keeping a collection of receipts and making notes in a pad whenever she doesn’t receive a receipt. Cash is an accounting nightmare.

  • Switch banks! This is an approach I highly recommend. It would take a significant amount of customers to send a message to a bank by closing accounts and taking their business elsewhere. I don’t expect banks who have chosen to implement these debit card fees to ever go back to the free model. Many banks, particularly smaller regional and local banks, have not begun nickel-and-diming their best customers. Credit unions, as well, pride themselves on being customer friendly; after all, the shareholders of credit unions are their customers, so there is no friction between the institutions pitting the needs of the owners against the needs of the customers.

Go and do it today. It will only take a few minutes; move your money out of any bank that plans to charge a monthly fee for using your debit card, which as of today includes these major banks:

  • Bank of America
  • JP Morgan Chase
  • Wells Fargo

There’s a new initiative called Bank Transfer Day, encouraging consumers to pull money out of big banks and into credit unions by November 5, 2011.

Updated February 14, 2012 and originally published September 30, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 15 comments… read them below or add one }

avatar twiggers

I hope there will be some type of notification sent out? I use BofA and rarely use my debit card (there are no benefits to using it, so I use a credit card for everything). That said, I will ensure that it NEVER gets used. In fact, I may request a basic ATM card to be sent that cannot be used as a debit card.

I believe this is absolutely outrageous. If someone makes a $1.00 purchase they are charged 500% for that purchase (assuming it is the only purchase that month….which sometimes happens to me if a place won’t take Amex).

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avatar Investor Junkie

This is to be expected. Those damn unintended consequences of new laws and low FED rates, so now everyone is equally punished. When is the government going to step in and ‘fix’ this issue?

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avatar SteveDH

They weren’t unintended they were unacknowledged. Everybody with a brain (this excludes policy writers and lawmakers) knew that the banks would make up the lost interchange fees through their customers. Why would a bank or any business do otherwise? This will hold true for taxes and any other imposed cost that can be generated by government. I’m just waiting for all those price drops we’ll see when the retailers have reduced interchange fees – not!

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avatar Money Beagle

The problem isn’t that they’re charging for their services, it’s that they’re doing so after giving it away for free for so long. Nobody likes to be given something for free and then asked to pay for it. Unfortunately, the banks are going to take it on the chin as far as their customer service reputation as a result.

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avatar Melanie

Is there a list of banks out there that are still offering free checking accounts (with a debit card). I know that Suntrust is changing their policy as well and sent out notifications to all it’s customers…

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avatar Sun

Union bank is California is still free.

Perkstreet has 2% cash back on debit non pin purchases if you maintain $5k else it’s 1% cash back. No monthly fee. And you can withdraw from 37k ATMs nationwide that has the star logo.

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avatar Jared

I have wells fargo & BOA. I haven’t noticed at changed wells fees, but BOA definitely has made some changes. My “student” checking account now is required to carry a minimum balance of $2500 or else be subject to a monthly fee. Seems like B.S. for a student account, eh?

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avatar shellye ♦107 (Cent)

This is the straw that broke the camel’s back. I use my BofA debit card a LOT, and have hesitated to change banks because of the inconvenience, even those I despise BofA. My high school and college students are also BofA customers. It will be a major pain to switch everyone but I’m done. USAA, here we come! :-)

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avatar Ceecee ♦53 (Newbie)

Look what effect the people had on Netflix! They lost their shirts on their price increase. The same message can be sent to BOFA. Cancel the cards! I would if I had one.

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avatar Raqs

Just to clarify, if I use my account for their online banking to pay bills, will that be included?

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avatar wylerassociate ♦162 (Cent)

I’m a bank of america customer and furious about this just like I was with netflix as ceecee mentioned. I’m considering opening an account with my local credit union. Does anyone here have good experience banking with credit unions?

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avatar Cherleen @ The College Investor

They earn when you keep your money… They also earn when they use your money… Way to go! It is high time to take the money out of these banks and move them to the ones that offer better rates and service.

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avatar robin

When is this supposed to go into effect? I have an account with them and have not seen a charge or been notified of one, and yes I use the ATM card.

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avatar Grant

As far as I know, ING Direct is still charging no fees (unless you use your card outside the US). No overdraft fees, no usage fees and no ATM fees (although the bank that owns the ATM may charge a fee so be careful).

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avatar qixx ♦1,890 (Half-Dollar)

“Go and do it today. It will only take a few minutes; move your money out of any bank that plans to charge a monthly fee for using your debit card…:”

Flexo – this is part of why i real every article you put out. Most of the other blogs i read would list the option of changing banks. You suggest action.

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