When several national banks announced they would start charging customers monthly fees for using debit cards (essentially, fees for people to access their own money), customers had reason to be angry … but not surprised. Even the casual observer of the banking industry should’ve seen this coming last year when new federal regulations limited “swipe fees” that banks charge merchants on debit card transactions.
The result of the new regulations was accurately described by American.com Editor Nick Schulz, whose op-ed appeared in the Oct. 23 Columbian: “And so banks have done exactly as they said they would do, raise fees elsewhere to make up for the lost revenue, estimated at over $6 billion.”
Regardless, the customers’ anger could not be ignored. After countless client outbursts and organized defections to other institutions such as credit unions, the banks reversed their field. Bank of America Corp. this week said it would abandon its plan to start charging a $5 monthly fee next year for debit card purchases. Earlier, Wells Fargo & Co. canceled a similar test program that was running in five states, and JPMorgan Chase & Co. did the same thing with pilot programs in two states. The lesson was quickly learned: In a competitive financial environment, customers will always be highly discerning, but even more so when they’re trying to keep their heads above water during an economic crisis.
This abrupt course correction demonstrates the power of an irate customer base, but before taking a victory lap, the major-bank patrons should remember two points. First, while charging people monthly fees to access their own money through debit cards was a flawed approach, the banks surely will find other ways to regenerate that revenue source. It could be through increased fees for using checking accounts or ATMs, or other actions. Second, public ire would be more suitably directed toward Congress instead of the major banks. Swipe-fee reform limited banks to charging 21 cents on a typical debit card transaction. Previously, banks were charging merchants an average of 44 cents.