Two weeks ago, I wrote about whether you should use your credit card more in light of new fees several banks would be charging their customers for non-ATM debit card transactions. Bank of America (NYS: BAC) led this group, with plans to charge customer $5 for each month they use their debit cards. JPMorgan Chase and Wells Fargo (NYS: WFC) had rolled out charges as tests in certain regions. Other banks, like SunTrust , planned on adding fees to its free checking accounts. (NYS: C) planned on raising its minimum balance requirements and monthly maintenance fees by the end of the year.
The new debit-card fee was designed to recoup lost revenue from debit-card swipe fees, estimated at $8 billion, which the Durbin Amendment of the Dodd-Frank Act had limited. But because of customer protest, most of those plans have been scrapped. SunTrust and Regions Financial (NYS: RF) have cancelled their fees and refunded customers who had been charged. Citing "customer feedback and the changing competitive marketplace," Bank of America has cancelled its debit-card charge. Wells Fargo is canceling its five-state pilot program, which was set to begin Nov. 15.
The banks may have been beaten into submission by outraged customers, but it's no doubt a temporary victory. A Facebook movement for Bank Transfer Day, held Nov. 5, called for people to switch from for-profit banks to nonprofit credit unions. The movement began with 500 people and by Saturday had 73,000 supporters, according to Bank Transfer Day's founder, Kristen Christian. "If you don't believe in a company's practices or feel that a company's practices are unethical, then, very simply, you should not have money with that company," Christian wrote in a press release.
It's a sentiment that resonated with bank customers. From Buffalo to Los Angeles, lines formed at credit unions and small banks on Saturday. In several cities, the movement was joined with the Occupy Wall Street movement, marching through town centers and protesting local branches of large banks. In Oakland, protestors temporarily shut down a Wells Fargo branch.
The Credit Union National Association estimates that at least 650,000 customers have joined a credit union since Bank of America announced the now-defunct fee on Sept. 29. Since then, credit unions have added $4.5 billion in new savings accounts, from both new and existing members.
We won't know until quarterly earnings are reported if Bank Transfer Day will have any impact, but it's not likely. $4.5 billion is a large amount for credit unions, but each of the 10 largest banks have more than $100 billion in assets. Individual accounts, with moderately low balances, such as the type that would have been hit hardest under many of the proposed fees, don't typically generate much revenue for larger banks. And the number of people who committed to switch to a credit union is far less than 1% of Bank of America's customer base.
Bank Transfer Day may have changed things for the customers who switched, but it doesn't look like it changed things for the banks they left. The debit-card fees may be off the table, for now, but banks will hardly stop trying to tack on fees to recoup the lost revenue. Banks such as BB&T (NYS: BBT) , SunTrust, Fifth Third (NAS: FITB) , and Sovereign Bank (part of Banco Santander (NYS: STD) ) are looking for other ways to generate revenue, including pushing customers toward credit cards and prepaid cards, which aren't subject to the debit-card cap.
While the banks may have rescinded their debit-card fees, they're looking for creative ways to recoup those fees in other areas. In the long term, those fees may be tacked on to previously free checking, a higher overdraft or low-balance fee, or other transaction fees. In the short term, the aggressive advertising for credit cards has begun, and will no doubt continue. Charge wisely, Fools.
Regardless of whether you're switching back to plastic or staying with cash, your credit card may soon be worthless. The Motley Fool's Rule Breakers team has taken a hard look at the industry and created this special video report, "Your Credit Card May Soon Be Worthless. Here's Why." It's one of our most popular features. Click here to watch it today. It's free for Fools.
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At the time this article was published Fool contributor Molly McCluskey is a proud credit union member, and does not own shares in any of the banks mentioned. The Motley Fool owns shares of Wells Fargo, Citigroup, Bank of America, JPMorgan Chase, and Fifth Third Bancorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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