NEW YORK -- Will a monthly debit card fee soon be the norm?
Bank of America, one of the largest financial institutions in the Charleston region, 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 it is still a novel concept for many consumers. But several banks have recently introduced or started testing debit card fees, including at least two others with Charleston operations.
That's in addition to the spate of other unwelcome changes 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. In greater Charleston, it was the No. 3 financial institution in the region based on its $1.05 billion in local deposits in mid-2010, according to the most recent data available.
The fee will apply to basic accounts, which are marketed toward those customers 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 be charged the fee only if they use their debit cards for purchases in any given month, said Anne Pace, a Bank of America spokeswoman. Those who use their cards only at ATMs won't have to pay.
The debit card fee will be rolled out in stages starting with select states in early 2012. The Charlotte-based company would not say which states would be affected first.
The changes come ahead of a regulation that goes into effect Saturday.
Starting Oct. 1, 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.
SunTrust, a regional bank based in Atlanta, began charging a $5 debit card fee on its basic checking accounts this summer. Regions Financial, which is based in Birmingham, Ala., plans to start charging a $4 fee next month. Both have branches in the Charleston area.
Chase and Wells Fargo, which is Charleston's biggest bank, are also testing $3 monthly debit card fees in select markets.
All charged up
The debit card fees that banks are charging or will charge are just the latest twist for their account holders.
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.
Customers still can get free checking in most cases, but only if they meet certain conditions, such as setting up direct deposit.
The study also found that the total average cost for using an ATM rose to $3.81, from $3.74, the year before. The average overdraft fee inched up to $30.83, from $30.47.