OOPS: Some Big Banks Decide Debit Fee Not Such A Good Idea
HUFFINGTONPOST.COM - Some big banks are beginning to decide that charging a debit card fee may lead to more trouble than it's worth.
JPMorgan Chase has decided it isn't going to charge customers to use their debit cards for purchases, after eight months of testing the program, the Wall Street Journal reports. The bank -- which is one of the biggest consumer banks, according to the WSJ -- is just the latest to decide not to charge for debit card use; Citigroup, PNC, U.S. Bankcorp and KeyCorp also recently announced that they would stay away from debit card fees.
This isn't the first fee JPMorgan Chase has decided against after consumer testing. The bank tested ATM fees on non-network customers earlier this year, charging $5 in Illinois and $4 in Texas, but eventually discontinued the plan.
Bank of America roiled customers when the bank announced last month that it would charge customers $5 per month to use their debit card for purchases starting in 2012. Wells Fargo announced in August that it would start testing a $3 debit fee for purchases this fall.
After Bank of America announced the debit card fee, critics took to Twitter and lambasted the new charge. President Barack Obama also derided the fee saying in an interview with ABC News that big banks don't have a right to mistreat their customers.
The banking industry immediately lashed out at Obama's comments, claiming new financial regulations had forced the banks' hand.
Either way, customers are showing that they feel the pain. One-third of consumers said they would leave their bank if it instituted a debit card fee, in a recent survey. New account openings at the nation's largest credit union were up by more than 20 percent the weekend after Bank of America announced the fee.
Still, none of the banks shying away from debit card fees said that the reaction to the Bank of America fee influenced their decision, according to the WSJ.
Brian Moynihan, Bank of America's CEO, said in an employee town hall meeting last week that he's been getting "incensed" at those who criticize his bank because they don't know "how much good" his employees do. Moynihan also defended the debit card fee earlier this month saying that his bank has a right to make a profit.
Banking industry officials have said that they need to start charging fees for once-free checking account services to make up for revenue lost as a result of financial reform regulations. Though Citibank does not plan to charge customers for using their debit cards, Citibank will charge certain customers as much as $20 per month for low account balances.
Despite the regulations, Bank of America raked in $6.2 billion in profits last quarter, up from a $7.3 billion loss during the same quarter last year.
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