One of the nation's largest credit card lenders will begin charging a monthly fee to consumers who want to use its branded debit cards, and some consumer advocates say it may be difficult to afford for those who have had trouble trying to reduce debt.
Bank of America recently announced plans to begin charging $5 per month for debit cards used to make purchases, and a number of other large financial national institutions including JPMorgan Chase and Wells Fargo are likely to follow suit, according to a report from the Wall Street Journal. The change comes in response to heavier federal regulation that the banking industry says will cost it as much as $6.6 billion annually. Bank of America estimates about $2 billion of that total will be from its revenues.
But consumer advocates are concerned about the changes because it will affect only customers with standard checking accounts, not those on premium accounts held by more affluent customers, the report said. That's because the accounts for wealthier bank customers tend to be more profitable to the bank than those with lower balances, and they are therefore exempt from nearly all fees Bank of America charges. The new fees go into effect October 1.
"I'm not making business decisions for [Bank of America], but I can only say from a consumer perspective, consumers are tired of being nickel and dimed," Norma Garcia, a lawyer for advocacy group Consumers Union, told the newspaper.
Both Wells Fargo and JPMorgan have been or soon will test their debit card fees as well, the report said. Beginning on October 14, select Wells Fargo customers in Nevada, Washington, Oregon, New Mexico and Georgia will be hit with a $3 fee for any month in which they use their debit card to make purchases. JPMorgan has been testing a $3 charge for debit card use in Wisconsin since February.
Among the new rules against which banks are rebelling is one that placed a limit on the amount banks could charge to businesses for processing debit card purchases. The Federal Reserve Board recently limited this fee to just 21 cents per transaction, down appreciably from the current average of 44 cents per purchase, but higher than the 12 cent limit that was originally proposed.