Bank of America, one of the largest financial institutions in the United States, plans to start charging its customers $5 per month for debit card usage. The bank will roll out this new fee in early 2012.
Bank of America and other U.S. banks have been considering additional fees for basic services for some time, citing increased federal regulations as the primary cause. Since regulations have limited revenues from overdraft fees, late fees, etc., Bank of America management has been forced to look for other charges to recoup these lost sources of income.
Besides lost revenue from these once traditional fees, Bank of America and other financial institutions are losing money from yet another federal regulation of a somewhat different scope. The Federal Reserve Board, in June of this year, announced new caps on debit card fees. These fees are paid by merchants, to the debit card’s issuing bank, whenever a customer uses a debit card for payment. Previously, these fees were capped at 44 cents per transaction but new regulations will reduce the cap to only 24 cents. This is a major revenue loss and it is yet another reason cited for the introduction of a $5 debit card customer fee.
Debit card merchant fee limitations approved by the Federal Reserve Board apply to any bank with more than $10 billion in total assets. That would include many of the large financial institutions in the United States such as Bank of America, Chase, Wells Fargo, and others. These banks will all witness reductions in revenue forcing each one of them to look for new income sources.
Not everyone will be charged the $5 fee. If a Bank of America customer doesn’t use his/her debit card during the month, there will be no fee incurred. Customers will not be charged this extra fee if they use their cards only at an ATM. But if customers use their Bank of America debit card at any time during the month for any purchase, however small, the $5 monthly fee will apply.
Certain premium accounts would be exempted from the $5 fee, but the vast majority of ordinary checking account customers will have to pay.
Bank of America fully expects a customer backlash against these new fees. But with so many financial institutions affected by federal regulations and desperate to find new sources of revenue, it is going to become increasingly difficult for depositors to find banks offering services free of charge.
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