Anyone who has a Bank of America debit card is in for a rude awakening beginning early next year. The bank plans to begin charging customers $5 per month when the card is used to make a purchase. Only customers who upgrade to a premium account with a higher minimum balance will be able to escape the charge.
A Bank of America spokesperson informed Dow Jones Newswires that recent regulations have changed “the economics of offering a debit card.” The Dodd-Frank law regarding financial reform lowers the amount banks may charge retailers for a debit transaction. This goes into effect in October, leading some issuers of debit cards to find other ways to recoup lost revenue.
Most Bank of America basic checking accounts will be subject to a 40 percent increase in monthly charges. Until the recent decision by the bank, fewer than two percent of its checking accounts had an annual or monthly fee for debit card use. According to the 2010 Bank of America annual report, one in two U.S. households is included in its customer base.
Bank of America is not the only institution to charge monthly debit card fees for purchases. This summer, Sun Trust bank started the trend. JPMorgan and Wells Fargo are currently experimenting with a $3 debit card fee. The most likely places to find banking free of fees are community banks and credit unions. To lower their costs, consumers must now become smarter shoppers when it comes to selecting a bank.
Free checking is also becoming a rare offering, with the number of large banks offering these accounts shrinking by 54 percent between fourth quarter 2009 and June 2011. Payday loans have long gotten a bad rap for the high fees they involve. Bank checking accounts and debit cards may become the newest unfavorable financial tools.
