Bank of America Is Latest to Add $5 Debit Card Fee

Bank of America will start charging debit-card users $5 a month to pay for purchases. The move comes as the cards increasingly replace cash and as banks look for ways to offset the loss of revenue from a new rule that will limit how much they can collect from merchants.

Paying to use a debit card was unheard of before this year and is still a novel concept for many consumers. But several banks have recently introduced or started testing debit card fees. That's in addition to the spate of other unwelcome changes checking account customers have seen in the past year. Bank of America will begin charging the fee early next year.

Bank of America's announcement carries added weight because it is the largest U.S. bank by deposits.

The fee will apply to basic accounts, which are marketed toward those with modest balances, and will be in addition to any existing monthly service fees. For example, one such account charges a $12 monthly fee unless customers meet certain conditions, such as maintaining a minimum average balance of $1,500.

Customers will only be charged the fee if they use their debit cards for purchases in any given month, said Anne Pace, a Bank of America spokeswoman. Those who only use their cards at ATMs won't have to pay.

The debit card fee is just the latest twist in the rapidly evolving market for checking accounts.

A study by this week found that just 45 percent of checking accounts are now free with no strings attached, down from 65 percent last year and 76 percent in 2009. Customers can still get free checking in most cases, but only if they meet certain conditions, such as setting up direct deposit.

The study also found that the total average cost for using an ATM rose to $3.81, from $3.74, the year before. The average overdraft fee inched up to $30.83, from $30.47.

The changes come ahead of a regulation that goes into effect next month.

Starting Oct. 1, the regulation will cap the fees that banks can collect from merchants whenever customers swipe their debit cards. Those fees generated $19 billion in revenue for banks in 2009, according to the Nilson Report, which tracks the payments industry.

There is no similar cap on the merchant fees that banks can collect when customers use their credit cards, however. That means many banks are increasingly encouraging customers to reach for their credit cards, in hopes of reversing a trend toward debit card usage in the past several years.

An increasing reliance on credit cards would be particularly beneficial for big institutions like Bank of America, which have large credit card portfolios, notes Bart Narter, a banking analyst with Celent, a consulting firm.

"It's become a more profitable business, at least in relation to debit cards," Narter said.

This summer, an Associated Press-GfK poll found that two-thirds of consumers use debit cards more frequently than credit cards. But when asked how they would react if they were charged a $3 monthly debit card fee, 61 percent said they'd find another way to pay.

With a $5 fee, 66 percent said they would change their payment method.

Several banks are nevertheless moving ahead with debit card fees.

SunTrust, a regional bank based in Atlanta, began charging a $5 debit card fee on its basic checking accounts this summer. Regions Financial, which is based in Birmingham, Ala., plans to start charging a $4 fee next month.

Chase and Wells Fargo are also testing $3 monthly debit card fees in select markets. Neither bank has said when it will make a final decision on whether to roll out the fee more broadly.

The growing prevalence of the debit card fee is alarming for Josh Wood, a 32-year-old financial adviser in Amarillo, Texas.

Wood relies entirely on debit cards to avoid interest charges on a credit card. If his bank, Wells Fargo, began charging a debit card fee, he said he would take his business to a credit union.

If a debit fee became so prevalent that it was unavoidable, Wood said he's not sure how he'd react.

"I might use all cash. Or go back to writing checks," he said.

Bank of America's debit card fee will be rolled out in stages starting with select states in early 2012. The company would not say which states would be affected first.

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i dont no how this well hurt me or help me.i dont get it.i have direct deposit.s.s.i.but i do side job's and put cash in the bank too.when i got my card i was told .now i dont need to carry a lot of cash with me.and i would get 2% cash back by useing there card.i have a saving acct.but not $1500.dose it cost to use there get cash out..why would i pay then 5.00 a month to use my money.and get 2% back.please help me.i dont get it.our they robing us.

November 01 2011 at 1:34 PM Report abuse rate up rate down Reply

I think I finally got it. If I rob a bank, I go to prison. If I rob a person on the street, I go to prison. If I extort money from someone, I go to prison. If I start a bank, pay myself millions in salary, and bonuses, take the bank on the verge of bankruptcy, get a bail-out from the government, and continue to gouge my customers of their hard earned money, I will be lauded as a financial genius and will be celebrated by my buddies in Congress. My choice is clear. Forget the gun, where do I incorporate my bank.

October 01 2011 at 10:55 PM Report abuse +1 rate up rate down Reply

I will change banks

October 01 2011 at 5:08 PM Report abuse +1 rate up rate down Reply

I will begin writing checks again that all

September 30 2011 at 11:55 PM Report abuse +1 rate up rate down Reply

Charge me a $5 fee and I will drop you like a hot rock!

September 30 2011 at 8:16 PM Report abuse +2 rate up rate down Reply
Savy Spender

September 30 2011 at 7:25 PM Report abuse +1 rate up rate down Reply

Just write checks for purchases.. Personally, I left Bank of America years ago!

September 30 2011 at 6:21 PM Report abuse +2 rate up rate down Reply

Lets all remember to THANK Barney Frank and Chris Dodd for all the changes in the Banking Laws that force banks like BOA to start charging debit cards.

September 30 2011 at 4:47 PM Report abuse +2 rate up rate down Reply

About 14 years ago I had an account with wellls fargo and at that time they charged $1 everytime the atm card was used. plus you got charged again at the bank or atm you used at another besides wells fargo. that only lasted a couple of years then the government said they couldnt do it so they stopped. what has changed over the years to do it again?

September 30 2011 at 4:33 PM Report abuse +2 rate up rate down Reply

I currently have an account with Regions Bank and because of the new $4 fee, I am closing my account. I refuse to pay a total of almost $10 in fees every month just to have a bank account with a bank that has lousy customer service to begin with. I'm going back to using just cash, and when a credit card is needed, a prepay Visa.

September 30 2011 at 4:19 PM Report abuse +2 rate up rate down Reply