Consumer outrage and backlash does work, apparently. Wells Fargo Bank and Chase Bank have been testing debit card fees in a small number of locations within the United States, but due to the anger unleashed after the largest bank, Bank of America, announced it would add a $5 debit card fee in 2012, the two smaller (but still very large) banks backpedaled. Wells Fargo and Chase are unwinding their test plans, and the bank executives have decided not to continue charging more customers for the benefit of accessing their own funds on deposit.
A customer who deposits cash in a checking or savings account has been traditionally doing the banks a favor by allowing them to initiate loans based on the funds held in deposit. In return of this favor, banks paid depositors interest. With banks not lending as much as they have in the past, banks are in no rush to acquire depositors. Thus, they can pay much less interest and increase fees. They’re happy to drive customers away.
Bank spokespeople also cite new regulations as rationalization for new fees. Particularly, the interchange fees banks charge retailers for accepting debit cards at the point of sale are now limited. In effect, banks are switching revenue-generation from retailers to depositors. With this new swipe fee regulation, retailers are now more protected than consumers.
Bank of America’s new debit card fee policy stirred public unrest, and from a public relations standpoint, Chase and Wells Fargo would do well to avoid more public outrage. That won’t be the end of this story for Wells Fargo and Chase. Corporations need to answer to their shareholders, and investors will not want to see a bank willingly part with revenue potential. While the banks are still making great profits in a “post-bailout” environment, expect the executives to tap another source. Be on the look-out for new fees now that certain banks are avoiding debit card fees.
Related: See my article, “The Bank-Fee Wake-Up Call,” on US News & World Report’s “My Money” blog.
Update: In response to the announcements from Wells Fargo and Chase, Bank of America offers a response. The bank will revamp its debit card fees, presumably by lowering the $20,000 minimum to avoid the monthly debit card fee. The bank has not made a decision, though, and unless the bank sees a mass exodus, expect the $5 debit card fee in 2012.
Second update: The finance industry, minus Bank of America, is continuing to listen to customers. SunTrust and Regions Bank have announced that their customers will no longer be subject to the new debit card fees. This leaves Bank of America on its own. Will the largest bank buckle?
Updated June 23, 2014 and originally published October 31, 2011.