Bank of America, proclaiming that its bottom line is hurt by new legislation that limits how much money banks can charge retailers for the privilege of letting customers pay with debit cards, announced that it will make up for those losses by charging customers a $5 monthly fee. The fee takes effect in 2012 and affects any customer who makes debit purchases. ATM and credit card transactions will remain free. Predictably, the bank's customers are not happy. Fox Business Network's Gerri Willis even cut up her debit card on air. The company's stock tumbled Friday morning following the news, and customers are threatening to leave the bank. How much will this backlash hurt BofA?
Customers are going to jump ship: "I've been a more-or-less satisfied Bank of America customer for years," says Jon Gorey at The Street. But if the bank intends to charge a $5 monthly fee for "something I can do elsewhere for free, I'm gone." There are plenty of other options, including local banks and online-only competitors like ING Direct, which, unlike Bank of America, aren't charging any fees for debit use. "Thank you, competitive free market."
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This could spell the end of debit: It's easy for customers to avoid these fees, says Daniel Indiviglio at The Atlantic. "They just have to stop using their debit cards." And it's likely that they will. A $5-a-month fee to use debit "would push me not to use it in any case other than emergencies" — especially when that fee doesn't apply to withdrawing cash from an ATM or using a credit card. Indeed, "debit could fade away altogether."
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Hold on. BofA might change its mind: Sadly, Bank of America isn't the only bank set to start charging debit fees, says Sarah Halzack at The Washington Post. But many see the new fees as "trial balloons" — they're testing customers to see how many will tolerate the charges. Consumers should continue to be vocal about their displeasure with these banks, "as they might ax the fee if enough customers gripe about it."
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Actually, Bank of America may win this fight: For now, angry customers are threatening to abandon the bank, says Jessica Dickler at CNN. But it's Bank of America "that could have the last laugh." After all, changing banks isn't exactly a breeze. Once consumers realize the hassle of it all — from having checks printed to switching their automatic payments — they're likely going to suck it up and stay with Bank of America.
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