This morning Bank of America announced it is shelving plans for a $5 monthly fee for using a debit card. If you'll recall, those plans had touched off a public relations nightmare for both BofA and the banking industry in general, leading to a lot of customer outrage and a social-media driven movement to get people to switch to community banks and credit unions. Regions is now the only large bank currently fielding a debit card fee.
While similar announcements in the last few days by Wells Fargo, JPMorgan Chase and SunTrust had left BofA out on a limb on this issue, I'm a little surprised to see the bank fold. After all, they were the first major bank to raise ATM fees to $3 per transaction, and they got a lot of customer flack at first, only to see the rest of the industry fall in line and that price level become the industry standard.
On the other hand, I think there are a couple of key differences here. One is the blowback from raising ATM fees isn't as bad for banks because those fees hit noncustomers; customers still get to use the ATMs for free. But also, that fee increase was levied in 2007, before the financial crisis slammed banks' reputations and customers' budgets.
I think the combined forces of consumers' negative perception of banks and a higher level of frugality driven by the dismal economy are putting banks on a much shorter leash these days. Consumers are much less tolerant of any bank actions they perceive as unfriendly to consumers, and they're watching their budgets a lot closer, so they're more likely to notice even small charges than they were a few years ago.
Vocal bank customers and consumer activists can certainly claim some credit for this outcome. Movements like Bank Transfer Day and a massive volume of customer complaints indisputably upped the pressure on banks to back off.
Going forward, though, some kind of change in big banks' checking account offerings is inevitable. Regulatory changes governing overdraft fees and the swipe fees banks charge merchants have seriously impacted banks profitability, as have rock-bottom loan rates and lagging loan demand.
Large banks will not run their checking divisions at a loss, and so they're going to have to either cut back on services and branches or increase fees in a less-visible way. I'm guessing most big banks will go with the latter, boosting balance requirements needed to avoid fees or tacking on bigger monthly maintenance fees. I think bank customers would do well to keep an eye on their statements and watch out for new fee schedules, which are the federally mandated harbingers to a heavier fee load for checking account customers.
What do you think? Is this a big victory for consumers? How will banks respond?
Update: Regions has also scrapped their debit card fees. All previously incurred fees will be returned to customers as of Nov. 4.