How bad was the debit card "fee-asco" for banks? It depends on who you ask.
In November, the Credit Union National Association released a statement that they their member credit unions had picked up 650,000 new members between Sept. 29 and Nov. 2. A few weeks later, though, they had to revise their figures down to 214,000 new members for the month of October and got some grief from the banking industry in the process. Here's a taste from a story by Jackie Stewart in American Banker:
"There is a saying that you are supposed to measure twice and cut once," says Keith Leggett, a senior economist at the American Bankers Association. "They decided to cut without measuring."
That doesn't mean, though, that Bank Transfer Day didn't have an impact. In its quarterly earnings report, Bank of America admitted it saw a 20 percent increase in the number of customers closing accounts last quarter after its debit card fee became a national issue.
James Van Dyke of Javelin Research has an interesting look at a Javelin report that attempts to nail down the exact damage done to large banks by their attempt to roll out debit card fees. Here's Van Dyke (emphasis mine):
Javelin's research estimates that 5.6 million U.S. adults with a banking relationship changed providers in the past 90 days. Of those switchers, 610,000 US adults (or 11% of the 5.6 million) cited Bank Transfer Day as their reason and actually moved their accounts from a large to a small institution. With a Google search of "bank transfer day" returning fully 22,000,000 responses we're not surprised that these angry bank-switchers represent nearly a three-time increase over the amount of people who took their funds out of large banks for the same stated reason during the previous 90-day period in 2011.
If Javelin's numbers are correct, it goes a long way toward explaining why banks backed off debit card fees so quickly.
The problem with Bank Transfer Day, though, is that while it did discourage banks from trying roll out highly visible new fees, it didn't really fix anything. There's still a structural imbalance, largely created by new regulation, between what large banks are paying to maintain checking accounts and what people are willing to pay for them.
True, banks can do some things at the margins to cut costs, but that's not going to make up for $12.2 billion annual loss in bank industry revenue. To close that gap, people are just going to have to get used to paying more for checking, or be willing to do without some services people traditionally expect from checking, such as branches with live tellers and large ATM networks.
What do you think? Are higher checking fees inevitable? Would you accept fewer services to avoid checking fees?