NEW YORK – Will a monthly debit card fee soon be the norm?
Bank of America said Thursday that it plans to start charging a $5 monthly fee when customers make debit card purchases. The fee will be rolled out starting early next year.
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 that checking-account customers have seen in the past 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 account.
A study by Bankrate.com 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 changes come ahead of a regulation that goes into effect next month.
Starting Saturday, 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.