If Bank of America is your primary banking institution for checking and/or savings accounts, you may want to consider switching service to your local credit union or other low- cost bank.
Bank of America, one of the largest financial institutions in the United States and a trend- setter among banks, has announced that it will start charging its customers a monthly fee for debit card usage. The fee will be a flat $5 charge for most all customer accounts with a debit card that use the debit card at any time during the month.
Bank of America has been strapped for cash for the past three years and new federal regulations have made the situation even more difficult. Regulators have instituted many new restrictions on banks, limiting fees from overdraft charges, over the limit fees on credit cards, etc., and with each new regulation, a key source of revenue is lost. Bank of America management has been forced to look for other charges to recoup these lost sources of income; hence the decision to charge customers for using a debit card.
Reduced revenue from customer penalties and fees is one thing, but the new regulations have now branched in other directions. In June of this year, for example, the Federal Reserve Board announced new caps on debit card merchant fees. These are the fees that merchants pay, directly to the debit card issuer, whenever an individual uses the debit card for an ordinary purchase. Previously, these fees were capped at 44 cents per transaction but new regulations will reduce the cap to only 24 cents. This regulation has once again cut into revenues, forcing Bank of America to look for replacement funds. And depositors have been selected to absorb some of these losses in the form of debit card fees.
Is there any way to avoid the $5 monthly charge? One is to simply not use the card- if your debit card isn’t touched during a given month, then there will be no fee to pay. Another option is to stick with ATM machines. The $5 fee won’t apply if debit cards are used only at these machines, but there will, of course, be ATM fees to pay. Another option is to go directly to your local Bank of America branch, withdraw a large amount of cash, and use cash to pay for weekly expenses. This isn’t necessarily recommended, because it isn’t wise to carry around wads of cash, but it would be one way to avoid using your debit card and avoid paying the $5 fee. Also, there are certain premium accounts (e.g., large dollar deposits) that will be exempted from the $5 fee, but the vast majority of ordinary checking account customers will have to pay.
Bank of America fully expects to lose some customers as a result of these new fees, but they feel the fees are necessary in order to cut losses caused by excessive regulations. And since the regulations apply to most large banks, it could be a matter of time until Chase, Wells Fargo, Citibank, and other banks follow suit, leaving former Bank of America customers with few places to turn.
Bank of America expects to roll out this new fee in early 2012, so be prepared.
Copyright 2011, Bryan Carey