Illinois Senator Dick Durbin has called for consumers to leave Bank of America as a result of its new $5 monthly fee. The fee comes as a result of a financial reform law Durbin helped to craft which lowered the interchange fees that banks could charge merchants.
ABC News reports the reason for Durbin’s statement:
Most basic checking accounts at Bank of America will see a 40 percent jump in monthly costs and the bank says the debit fee will be waived for customers who upgrade to “premium” accounts that require higher minimum balances.
Via the NY Times:
The second source was interchange fees, which gouged merchants who accepted debit cards. Though merchants at first resisted debit cards, they eventually caved because banks made them so ubiquitous. Banks pushed debit cards in part because they are much less expensive to process than checks (which banks lose money on). But banks also got hooked on the absurdly high interchange fees they charged merchants — an average of 44 cents per transaction, even though it costs literally pennies to process a debit-card transaction.
In the summer of 2010, the Federal Reserve told the banking industry it could no longer charge overdraft fees unless customers “opted in.” To its ever-lasting credit, Bank of America, unlike its competitors, did not run a big scare campaign to persuade customers to agree to the opt-in. It chose to forgo the revenue, which amounted to some $3.3 billion, according to Credit Suisse.
Regardless of the political spin that has come with this change, many BOA patrons will be seeking to bank elsewhere. For those on fixed incomes that are long-time BOA patrons and are not aware of the fees, BOA is waiving its fees for the first two months of its new policy. It will be interesting to see how other banks deal with the new law. Some may take in BOA patrons searching for fee-less banking. Other banks may study BOA’s model and decide whether its worth doing the same.