Is Bank of America’s $5 Monthly Debit Card Fee Just the Beginning?

By Paul Michael. Last updated 7 October 2011. 15 comments

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In a word, yes.

Consider this phrase — “Take money from businesses, they’ll just turn around and take it from the customers.”

I’ve heard that, and many variations of it, several times over the last few years. Now it looks like it’s coming true for all of us.

It’s no secret that banks make a lot of their money from fees. Whether it’s late payment penalties, interest rate hikes, ATM fees, money-wiring transactions, or any number of other transactions, fees are the bread and butter of the banking industry.

These fees seemed to be going away, or getting vastly reduced, as banks tried to outdo each other in the battle for your hard-earned money. Free checking was suddenly the norm, and then banks would offer even more incentives (free iPods, luggage, shotguns, and good old cash) in an effort to get you on board.

Of course, nothing lasts forever, and the free checking benefits we’ve all enjoyed for many years have started to suffer the death of a thousand cuts. Slowly but surely, free checking is going away and being replaced by certain terms and conditions that give you certain free features IF you maintain a set minimum balance, have a significant number of direct deposits, and so on.

In fact, you can actually avoid Bank Of America’s new debit card fee if maintain a minimum balance of $20,000. (Once again, we see wealth being rewarded.) You can also avoid the fee by simply using your debit card as an ATM card only. (See also: 4 Ways to Beat Debit Card Fees)

So Why Did This New Fee Appear?

Well, it’s a direct result of a bill passed by congress that was supposed to save consumers money. Of course, it never works out that way, does it?

Banks have been making billions of dollars on swipe fees for many years now. These are fees charged to the merchant every time you swipe your debit card, and they average around 44 cents per swipe.

Or at least, they did. Merchants lobbied against the fees and won, saying that by lowering the price of these swipe fees, we, the customers, would get lower prices on goods and services.

But when they passed the law, they didn’t think of the ramifications of the ripple effect. It’s also known as “unintended consequences.” By cutting these fees in half, billions of dollars have been taken away, annually, from the banks. Ouch. You know as well as I do that those losses are not going to be absorbed by the banks. The CEO, Brian Moynihan, isn’t going to pay for it out of his $950k salary or his $9 million in stock awards.

So who pays? You’ve guessed it — we’re the ones who pick up the tab. And the $5 per month debit card charge is only just the beginning; I guarantee it.

Bank of America Is Not the Only One Raising Fees

JP Morgan Chase customers in Wisconsin have felt the pinch, with $3 per month being deducted for debit card usage. Sun Trust (Georgia) and Regions Financial Corp. (Alabama) are also charging $4 to $5 per month.

And Wells Fargo recently announced that it will test a $3 per month debit card fee in five states — Oregon, New Mexico, Nevada, Georgia, and Washington.

What Does the Future Hold?

Fees. Lots of them.

Right now, with the financial institutions just starting to roll out fees, you obviously have the option to walk away. But that won't be an option for long. If you want the conveniences that a typical bank offers, you’re going to have to start paying for them. Banks across the U.S. will follow Bank Of America’s lead, because they’re losing out if they don’t. And any banks who don’t charge the fee will no doubt find other ways to make up the losses. You’ll see free checking replaced by checking that requires maintenance fees. You’ll get dinged if you go below a certain balance, or if you make more than a set number of purchases with your debit card each month.

There will be tiered plans — $3 a month for 50 swipes, $15 for unlimited swipes. And why not? The cell phone industry is all about tiered pricing. And you’ll have to pay for the privilege of online banking, automatic bill payments, even checking your balance on your phone. This is the future, and if everyone’s doing it, so we really don’t have an option other than to remove ourselves from the banking system and go back to the stone-age. Anyone for a mattress stuffed with cash?

And What About the Merchants Who Said They’d Cut Prices?

That’s a tough one to prove. Walmart has been rolling back prices for years, long before this bill came into effect. Target, Home Depot, Best Buy, you name it — they constantly claim to be slashing prices, so how can we tell if those savings are being passed on to us?

Truth is, as consumers, we can’t. I’m not saying that the big corporations are going back on their word to pass on savings to the customers, I just can’t prove that they are. I suspect the reality is somewhere in the middle, with some savings being passed on to us, and some money going back into the wage packets of CEOs and senior management.

Sadly, it’s just another example of the consumer being at the bottom of the hill…and we all know what rolls down hill.

Additional photo credit: MoneyBlogNewz
Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

Guest's picture
Amy V.

I left one of the major banking chains because they just couldn't compare to my local credit union for friendliness, helpfulness, and fewer fees. I haven't looked back.

Guest's picture

You said it. We all know the golden rule: He who has the gold makes the rules. That is why when you increase my property tax, I increase the rent. It is simple as that. We will be lucky if there is one bank that serves as a hold out. If so, then they might just get an increase in market share much like SouthWest Airlines has been increasing market share since Bags Fly Free.

Guest's picture

Switch to a local credit union! We left B of A several years ago when all the mortgage stuff hit the fan, and have never looked back. Our credit union even gives us dividends in addition to interest, based on how much you have deposited or on loan. Awesome!

Guest's picture

Seriously, how many times a person goes to a branch physically? Everything can be conducted online. Just like Amy V., I also left a big bank many years ago and joined a credit union, never looked back. This is just in case I need to go into a branch. I've also opened up another checking account at PerkStreet, which gives me cash back for using my debit card + a savings at ING.

ATM? Credit union, get cash at stores and Allpoint Network (which ING is part of) are sufficient for me. I don't even need to look for a specific branch to get money out. Customers, LEAVE big banks now! They'll beg for you to come back when they're losing customers.

Guest's picture

Well, said! Consumers end up paying for everything in the long run. I've heard from many B of A customers who are looking to get out. Many like those who have commented are going to credit unions.

I'm sticking with them because I've managed to avoid their fees although I don't have a minimum balance of $20,000. I'm sticking to cash... hope this helps cut my expenses!

Guest's picture

Can you say, "Credit Union?"

Guest's picture

Here is what will happen when everyone or most everyone goes from a Bank to a Credit Union. The Banks will go to Washington DC with their big sacks of money and they will fill our Congressional leadership pockets with lots of cash so that they will make it a law to make the Credit Unions charge the fees to their customers just like the banks do. This is how Congress [DEN OF THIEVES] work. Big money makes laws like that. This is the main reason that thousands of people have been demonstrating. The supreme court even supports this type of corruption. This country is existing at this point only by the grace of GOD, it sure isnt by the leadership in Washington.

Guest's picture

usaa!!! no fees and took no bailouts!! b of a has charged maintinance fees for as long as i have had my account, 6 years plus. f them all, greed is one of the seven deadly sins.

Guest's picture

the money will flow to stop the credit unions

Guest's picture

Can anyone say Credit Union?

Guest's picture

I've decided to go old school and start using cash again. No fees. When I run out of cash, I stop spending. Very simple. No overdraft problems and related fees, either.

Guest's picture

I disagree that the wealth is being rewarded by keeping 20, 000 on the account. Believe you me,
the bank will manage to squeeze 60 USD from your 20, 000 balance a year...

The economy is such state that you can not do it without banks. So I agree, this is just a beginning...
but, on the other hand if we were picking up 44 cents per swipe (I hope you do not thing that merchants were not passing on to you the swipe)...
maybe we are saving some money.

This is assuming merchants dropped the prices..

Guest's picture

This scares me. I hope that behavior like this will push consumers to use credit unions more.

Guest's picture

Time to join a Credit Union! So much better than banks. I actually MAKE about $3 on my checking account each month with my high yield checking account at my CU. By far better services than any bank I have gone to. It's not a problem that they aren't everywhere because you can got to a store with your FREE debit card and get cash back for FREE. No charges. It just makes sense.

Guest's picture

Banks have, for a while, made quite a bit from fees. But I didn't
think this was too traditional. I thought bank have traditionally made
most of their money from lending out money for more than they
paid for it. Am I wrong?

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