“Banks Plan New Fees for Using Debit Cards”
“Avarice; the spur of industry.”
- David Hume
Following the lead of Wells Fargo and others, Bank of America (BofA) plans to charge a $5 fee to customers that use a BofA debit card to make purchases. The change begins next year. As anticipated, BofA’s customers are in an uproar and have threatened to take their money and invest it in “Soup-Can-In-Backyard” Savings and Investments.
According to Andrew Johnson’s article in the Wall Street Journal Online (www.wsj.com), BofA will charge the $5 monthly fee to debit card holders that use the card to make purchases. It won’t be charged if the card is used only at ATMs or not used at all.
All of the bank’s basic checking accounts will carry the fee, including the bank’s MyAccess, Essentials, E-banking and Enhanced accounts. Customers with high-end accounts linked to investment accounts at Merrill Lynch will be given courtesy debit card use with no fees (naturally).
Upon reading this article several times throughout the day, I grew less and less agitated with the idea of a $5 fee and more of the idea that people will eventually come to terms with it and move on. Don’t get me wrong, I think a few Bank of America customers will jump ship, but—in the end— most will not.
Would I jump ship? If I relied on my Bank of America debit card for making purchases, this will essentially become a $60 a year fee. That would be incentive enough for me to jump. However, I probably wouldn’t jump immediately. Why?
I expect some other banks to follow suit. Bank of America wouldn’t be making this move if they didn’t believe it would help their financial statement (which has been in peril for some time now). Given that, I fully expect other banks to match this move in the next year or so. Thus, if I were with Bank of America and thinking of jumping, I wouldn’t jump until the end of the year when I can see if any other banks are adding similar fees. The longer you wait, the more time you have to see if the banks you’re eyeing are adding such things. I think other banks will advertise their free debit card usage in an effort to attract customers which is sad in a sense.
Ultimately, I think banks would like for its customers to use their credit card more often, then the “free-of-fee” debit cards. Having people carry balances on a BofA credit card is far more advantageous to banks than a paid off debit. How do you do that? By discouraging people to use their debit card as a means of payment. However, with so many Americans in no position to obtain lines of credit, I can see a point where the pre-paid credit cards become the vehicle of choice for many (which have many nefarious fees and erroneous charges also).
All in all, this isn’t a great move for banking customers, but it’s not devastating, either. If I were the customer of a bank making a move like this, I would probably be tempted to switch banks, not just because of the fees, but because it sends something of a signal that I wasn’t a fan of a move like this. My advice would be to look into your local credit unions. Although you lose out on availability, access of ATMs and incentives you increase your ability to get a good interest rate, gain good financial advice, and ease of startup (i.e.- most take a $1 to start).
- financialaffirmations posted this