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Chase, other banks won't charge monthly debit card use fees

After negative reaction to Bank of America's $5 fee, other banks back off

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See later story: Bank of America reverses course, drops controversial debit card fee.

In the face of widespread angry backlash from customers, several large banks are abandoning or not considering plans to charge debit card usage fees.

After the public backlash against debit card fees, some banks now say they won't implement them

JP Morgan Chase, PNC and Citi will not charge customers separate fees for accessing money in their checking and savings accounts.

The announcements come on the heels of a wave of anger directed at Bank of America's decision to begin charging $5 in any month that customers use their debit cards at the cash register or online to make purchases. The new fee -- set to begin rolling out in early 2012 -- would not affect ATM withdrawals or online bill payments.

BofA customers with certain "premium" accounts with high average daily balances or who have mortgages or student accounts with the bank would be exempt from the fees.

The bank said the fees were necessary because a new federal law that took effect Oct. 1, 2011. The law, part of the Wall Street reform law of 2010, caps the amount banks can collect from merchants in debit card swipe fees. The banking industry estimates this will slash swipe fee revenues by nearly 40 percent.

BofA was roundly criticized by consumer groups for the debit card fees. A CreditCards.com poll on debit card fees conducted in early October 2011 found that two out of three debit card users said they'll stop swiping their cards if banks charge usage fees. Four out of five debit card users said they'll switch banks if hit with a monthly debit fee, although consumer groups warn that's easier said than done because it's difficult to compare checking account products and services and know that you're getting a better deal.

"Given the negative consumer and media attention that BofA has garnered with its debit fee, I am not surprised that Chase has decided not to implement a similar fee," said Beth Robertson, director of payments research for Javelin Strategy & Research consulting firm. "I think it was wise of Chase -- and some other banks -- to test their fee, rather than to simply implement it."

Given the negative consumer and media attention that BofA has garnered with its debit fee, I am not surprised that Chase has decided not to implement a similar fee.

-- Beth Robertson
Javelin Strategy & Research

She added: "I expect the banks, like Chase, that aren't charging debit fees will charge other types of fees, but they can do that most effectively by associating those fees with new or value-added services rather than by applying what appears to be a punitive fee to existing services." 

Wells Fargo began testing a $3 monthly debit card use fee on Oct. 14, 2011, in five states (New Mexico, Georgia, Nevada, Washington and Oregon). "We are still evaluating the results," a Wells Fargo spokeswoman said. SunTrust Bank began charging $5 a month on its "Everyday Checking" accounts for unlimited debit card purchases in June 2011. A SunTrust spokesman said customers won't be charged if they don't use their cards in any given month or use the ATM to withdraw money. (See 9 ways to avoid new debit card use fees.) 

Saying 'no' to debit card fees
Chase, currently the nation's largest bank by assets, has been testing a $3-a-month fee for having a debit card to customers in Wisconsin and Georgia since February 2011. According to a person familiar with Chase's program, the bank will end its test in November and has no plans to permanently institute a debit card fee.

Citi issued a statement in September 2011, saying, "Unlike many of our competitors, we will not charge fees that discourage use or make it unreasonably expensive to take advantage of the tools and services that consumers say are important for managing their finances ... The bottom line is that customers don't want to pay to use their debit card."

According to PNC's retail banking executive Todd Barnhart, that bank decided not to charge debit card fees "based on feedback from our customers who view the debit card as an extension of the checking account -- not a separate product for which they should be charged." 

Consumers Union commended Chase for the decision and urged BofA to follow suit. The consumer group has sent letters to the CEOs of Wells Fargo, Chase, BofA and SunTrust urging them to kill the fees.

"Consumers Union has heard from thousands of consumers across the country who are outraged that Bank of America is instituting the $5 monthly debit card fee," Norma Garcia, manager of financial services, said in a statement. "It's time for Bank of America to listen to its customers who are saying loud and clear: Drop the fee or we'll drop you. All banks that are considering debit card fees should ditch those plans."

She added: "It's unfair for banks to stick consumers with a monthly fee just to use their own money," said Garcia. "The banks that charge debit card fees risk losing customers who are fed up with financial institutions that got bailed out that are now turning around and hiking fees."

See related: Poll: 2 out ot 3 debit card users will stop swiping cards if banks charge usage fees, 9 ways to avoid new debit card use fees, Banks add new $3 fee for accessing your own money, Debit card swipe fee debate pits banks vs. retailers

Published: October 28, 2011


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