The nation's largest bank faced a wave of criticism Friday for its plan to charge a $5 monthly debit card fee, and regional lenders in the Charleston area said they expect that Bank of America's new policy could hand them some customers.
Social media sites filled with negative comments about the new fee, Bank of America's website was down for most of the day, and politicians and public relations firms fired off statements seeking to assign blame for the debit card fees.
"Dear BofA, Netflix already tried a stunt like that; do you really think this is a good idea?" said Charleston resident Caroline Mallari in a post on Twitter. Netflix in July raised the minimum price for its streaming video and DVD-by-mail combination by $6 a month, which was followed by customers cancellations and a plunge in Netflix stock.
Bank of America wasn't the first bank to announce debit card fees, but it is the largest, with nearly 39 million debit-card-carrying customers. Beginning in January, the bank said it will charge $5 monthly to customers who make purchases or pay bills with their debit cards, with exceptions for small-business customers and those with "platinum privileges, premium or advantage accounts."
SunTrust previously announced that a $5 debit card fee will apply to "everyday checking" accounts starting in November, unless the account has direct deposit or maintains a required minimum balance.
Other banks have announced debit fees or, like Wells Fargo and Chase, are testing customer reaction in some markets outside South Carolina.
Some Bank of America customers, incensed at the idea of paying a fee to access their own money, have vowed to switch banks. Others are resigned to paying the charges.
"You have to take it I guess," said Kristy Hummel, a 35-year-old College of Charleston student from California. "I would probably still use the debit card, because $5 a month is better than using a credit card."
Debit cards draw money directly from a customer's bank account, so debit card spending doesn't turn into interest-bearing debt. Banks will allow debit card holders to spend more money than they have available, and then charge them fees, if the customer has overdraft protection.
The big banks said they are charging debit fees to make up revenue lost because of new federal regulations contained in the Dodd-Frank Act. Banks with more than $10 billion in assets are, as of today, collecting smaller fees from retailers each time someone swipes a debit card -- about 24 cents per transaction instead of 44 cents -- due to the regulations.
"We're under $10 billion, so our transaction revenue did not change," said Bill Medich, South Carolina Bank and Trust senior vice president in Charleston. "The consumer just wants to know if they're going to have to pay to have a debit card, and for us the answer is 'no,' at least not now."
Scott Woods, president and CEO of S.C. Federal Credit Union, said he believes federal regulators overstepped, but he said the outcome "is a tremendous opportunity for financial institutions to differentiate themselves."
The credit union charges no debit card fees, nor does First Federal, the largest bank headquartered in the Charleston region.
"We're starting to go in the opposite direction, and are rewarding customers for using their debit cards," said Rick Arthur, executive vice president of retail banking at First Federal. He believes the regional bank will attract customers from Bank of America.
"I'm confident we will," he said.