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Why Bank of America fee touches a nerve

The announcement of a $5-a-month debit card fee has provoked a consumer backlash. Did the big bank miscalculate?

By MSN Money Partner Oct 12, 2011 2:43PM

This post comes from Richard Barrington at partner site MoneyRates.

 

MoneyRates on MSN MoneyBank of America earned itself a barrage of customer complaints and negative publicity by announcing a $5-a-month fee on debit cards recently. Banks raise fees all the time, so why has Bank of America's decision touched such a nerve?

 

Here are four thoughts to help put this in perspective:

 

Bank of America is ignoring the Netflix example. Customers will get on board with new fees if the change seems incremental; when the change seems too radical, there can be a backlash. Netflix recently alienated a sizable portion of its customer base with an overly aggressive fee increase. That gaffe was well-publicized, but apparently Bank of America did not take notes.

 

There is a political element to Bank of America's actions. Bank of America is under a variety of financial pressures, but the proximate cause of the debit card fee is the Durbin Amendment to the Dodd-Frank Act, which limits the amount that large banks can charge retailers for processing debit card transactions. The high-profile way in which Bank of America (and some other banks) announced the new fee seems at least partially motivated by a desire to make a political statement about the cost of regulation. Post continues after video.

A political statement can spark a political backlash. Of course, by making such a high-profile statement, Bank of America opened itself up to public reaction, and the resulting negative publicity has almost certainly been more than Bank of America anticipated.

 

The marketplace will ultimately decide who is right. New fees can spark a sense of moral outrage, but in the end it's a financial decision. Is having a debit card worth paying $5 a month? Possibly -- but probably not as long as you can get the same thing for free somewhere else.

 

For now, Bank of America is in the minority in charging a monthly debit card fee, and that's a disadvantage because customers have plenty of alternatives offering free checking accounts and debit cards. As much as Bank of America will miss the revenue they used to get from higher transaction charges to retailers, they may find themselves missing even more the customers who now walk away.

 

More on MoneyRates and MSN Money:

48Comments
Oct 12, 2011 8:15PM
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This whole idea of raising prices, somehow has to be turned around. I have in front of me a copy of my Telephone, TV, & internet bundle. FCC ADMIN FEE-$.07  SALES TAX-$1.51  FRANCHISE FEE-$1.11  BROADCAST TV SURCHARGE-$1.09  INTERNET SALES TAX-$.51  END USER COMMON LINE CHARGE-$6.50  FEDERAL EXCISE TAX-$.20  FEDERAL UNIVERSAL SERVICE FUND-$.96  REGULATORY COST FEE-$.16  TELEPHONE SALES TAX-$1.89  STATE E911 SURCHARGE-$.80  TELEPHONE ASSISTANCE PLAN-$.06  TELECOM ASSISTANCE FUND-$.06  STATE PUC FEE-$.04   TOTAL TAXES & FEES --$14.96

 

When I asked the lady in the office, "how I could tell if these were legitimate charges," her eyes glazed over and she could not answer me. The whole system has terminal cancer.

Oct 12, 2011 10:42PM
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Didn't we bail these good ole boys out? It's time for their over paid CEO's to take a cut and fix their bank internally! I think they could give up a couple of their 3 martini lunches.

 

bank of america probably you think you are going to earn $60 per year per client, and some might pay that, but you are going to need more customers to compensate for all the customers that will leave.

 

just incase anyone from BofA is reading this, which I doubt!

Oct 12, 2011 6:31PM
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the powerful bank lobby will probably try to force the government to require credit unions to make similar charges.  A big campain contribution "bribe"  works wonders toward geting things your way.
Oct 12, 2011 5:50PM
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Bank of America is one of the most crooked banks in the US, come on people, sh-t can these losers! I agree with the other posters, use your local credit union, they truly are "for the people".
Oct 12, 2011 8:33PM
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It was sure a 'no-brainer- for me today. CD's were mature and local [county] bank FDIC insured had a better rate, well! on withdrawl from B of A they cried all the way as I left with my six figure cashiers check and told them that they're too greedy and I'm not the one to pay for services others offer for free . . . . Good-Bye B of A . . Don't call me - I'll call you! Yeah-right!!!!
Oct 12, 2011 7:37PM
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It is going to take the people of america to show bank of america that we are sick and tired of all these  fees,nobody is working for the people.banks are getting rich with these fees,as I read earlier head to your local credit union,we'll show them(banks)that we're not putting up with this crap.

Oct 12, 2011 4:15PM
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Don't walk run, to your nearest Credit Union.....
Oct 12, 2011 10:25PM
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It appears that many people are jumping ship.  I called the Credit Union where I have my auto loan, and she said that so many people are opening accounts that they had to bring in more people in each branch to take care of new accounts.  It will take a bit to transfer all the direct deposits, and the changes to each credit card to amend the account etc, but it is worth it.  We are not wealthy, but with each member of our home changing, it will reflect multiple savings and checking acocounts. I voted with my  account...and it appears that BOFA might begin to get the message..... "you are too big and we are ready to do something different".  THIS IS NOT A DAY OF POSH AND PLENTY, IT IS A DAY OF HELPING OTHERS AND GETTING THROUGH THE MESS.

 

Oct 12, 2011 9:47PM
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Who ever wrote this article is out of touch with the American public - also known as taxpayers and possible customers...   Many here have experienced some very aggressive plundering by B of A.   As customers we have been exploited and that w/o consent - there are numerous lawsuits afloat to evidence that.   This bank has blatant contempt for its customers - we exist to be creatively fleeced.     The bank has no soul and intentionally did systematically and  aggressively plunder their customers.   Like Rodney Danger field used to say, "Can't get any respect." and we bailed them out.    The announcement is meaningless and simply serves to signal a serious reason for their customers to leave a ship already sinking in a sea of greed.   Sort of reminiscent of K-mart.
Oct 12, 2011 4:47PM
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What in God's name is any retail customer doing with an account at BAC anyway?  I dumped banks 30 years ago and haven't looked back.  Credit unions are the way to go. 
Oct 12, 2011 9:16PM
Oct 12, 2011 11:37PM
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I have been with credit unions for the past 20 years and was surprised to find it much more user friendly and drastically less expensive in terms of fees and interest rates for loans.  They have always been extraordinarily attentive to my needs.
Oct 12, 2011 10:37PM
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Remember the day that banks paid you to leave money in the bank? Some banks are giving everything free so look around, dont just leave it business as usual and get lazy and pay the money! go with block buster for your movies and tell bank OF F america go to hell!
Oct 12, 2011 7:49PM
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WAKE UP!

 

B of A is waiting a 2 year period to file bankrupcy, so their execs dont get prison. Take your money out ASAP, FDIC may not be able to cover those loses as govnt is running on debts.

Oct 12, 2011 9:43PM
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I wrote a very similar sentiment, as the one expressed in the article above, just a few days ago on  another thread.   This one is comparing B of A to Netflix, while in my example, I was writing about Costco increasing its membership fees and comparing it to Netflix.

 

In both cases, the underlying principle is the same....that of raising fees in an economy where the public is pretty much p.o.'d already,.... is a move that may backfire on you.

Oct 13, 2011 1:18AM
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As soon as they announced this fee, I immediatley decided to switch banks.  I'm going to a credit union.  I hope enough people leave to send a strong message to them.  I will never go back.  This was the last straw.
Oct 12, 2011 9:43PM
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@Irmopinion...it's not $5 per transaction, it's $5 per month.  But still, it's ridiculous.  And BoA loves to "fee" people to death.

 

Oct 12, 2011 7:39PM
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The problem and consumer outrage is not limited to B of A, and your last point that "The marketplace will ultimately decide who is right" is correct. Less than one week ago, I cancelled my Chase checking and savings accounts because of fees, and moved the money to Bank United.

The decision was easy, especially since Bank United offers 1.00% per month (yes, per month) on direct deposit amounts up to $1,500, as long as I maintain a corresponding CD or savings account of $15,000. Even when averaging the lower CD return with the 1% per month on $1,500, it's still a good deal.

Oct 13, 2011 1:06AM
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B of A, the same bank that lost $14,000 of my US Saving Bonds for my kid’s college. Can you believe a bank can loose your Safe Deposit Box? B of A did. Then they tried to say I never had an account with them. I showed them my Deposit box key and the manager said it was the banks key alright. Then she asked if she could have it. Can you believe it? I told her hell no you can’t have it, it’s the only tangible evidence I had to try and straighten out this mess. B of A never did fix the problem. I had to confront the Treasury Department. And believe me! That’s a whole nother chapter in the reality of crooked business. Took almost 1.5 years and you’d better have kept good records. They sure won’t go out of their way either.

In God I Trust, who else is there?

Oct 13, 2011 12:41AM
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I have become what some would call heartless. I don't believe I am. I prefer the term hardened. I would like to see the CEO and all his minions at B of A dragged out into the street. After being pummeled for a while they get their skulls crushed. They are traitors to  this nation and deserve nothing less than a painful death. That goes for PNC/Chase as well. Maybe when their higher ups starting dying the other banks will get the message. I know many people who are tired of being screwed by the banks without even the courtesy of a reach around. Or any KY for that screwing. Anyone that does business with the big banks really need their heads examined for sighs of life. If you don't like my opinion, feel free to unread it.
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