Bank of America to Charge for Debit Card Use


A New Horizon Credit Counseling Warns Their Clients

Fort Lauderdale, Fla. – The nation’s largest bank, Bank of America, announced that it will start charging customers a $5 monthly fee next month when they use their debit cards for purchases. Regions Financial also plans to start charging $4 and SunTrust, another large regional bank, is charging a $5 fee. Wells Fargo and Chase are testing $3 monthly debit card fees. The fees would be triggered each month if depositors use their debit cards to make any purchase, no matter how small. A purchase of a $1.00 candy bar will produce a $5.00 fee.

Steven Stark, General Counsel and Chief Operating Officer for A New Horizon Credit Counseling Services, a Florida based credit counseling company, warns that “this is just one of several new charges the banks have created to overcome new regulations restricting banks’ profits in other fee areas”. Stark added, “These fees will be in addition to any regular monthly fees the depositor is charged for maintaining their account at the bank. Our clients already have a difficult time maintaining a deposit balance required for banks to waive their monthly fee which averages $12. Furthermore, our clients are counseled by us to use their debit cards rather than credit cards so that they can better manage their finances.” An Associated Press poll earlier this summer found that two-thirds of consumers use debit cards more frequently than credit cards. When they were asked how they would react if they were charged a $3 monthly debit card fee, 61% said they would find another way to pay.

The fee is a result of a rule, known as the Durbin Rule, after the amendments sponsor Senator Richard J. Durbin, and is a crucial part of the Dodd-Frank financial overhaul law. The rule limits the fees that banks can levy on merchants every time a consumer uses a debit card to make a purchase, commonly referred to as swipe-fees. Before the Durbin Rule, the bank fees were charged to the merchant and averaged 44 cents per transaction. The Federal Reserve in June agreed to cut the fees to a maximum of about 24 cents and is expected to cost the banks about $6.6 billion in revenue a year, beginning in 2012, according to Javelin Strategy and Research. That is in addition to another loss of $5.6 billion from new rules restricting overdraft fees, which went into effect in July 2010.  

Senator Durbin said in a recent statement. "It seems that old habits die hard for Bank of America. After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers. Banks that try to make up their excess profits off the backs of their customers will finally learn how a competitive market works." Citibank is one of the few banks that said it would not introduce a charge for debit card use.

Stark summed it up by stating, “Over the last few years, consumers have shifted their purchasing away from credit cards and have embraced the debit card as a way to control overspending; a tool that we, as credit counselors, recommend to our clients. This new fee may very likely prompt consumers to return to credit card use which is far more profitable for the banks.”