If you bank with Bank of America and use a debit card, then beginning next year you may see a new $5 monthly charge on your bank statement. Bank of America isn’t the first bank to start charging a debit card fee but its $5 fee is higher than others and that is just one reason why it has been a popular topic in the personal finance news cycle.
After news of the new debit fee started making its way to customers, many proclaimed that they would switch banks, start using cash or even begin using a credit card again. The last alternative, switching to credit, may actually be more beneficial for B of A according to this CNNMoney.com article quoting LowCards.com CEO Bill Hardekopf, “Banks are not only making money on the debit card fees but also pushing people to use their credit cards where banks make a heck of a lot more money down the road.”
A SmartMoney.com staff writer examines the two main alternatives to a debit card, cash or credit, in this article. Although there are benefits to both the winners in this deal will likely be consumers that use credit but pay it off in full every month. Of course, that takes quite a bit of discipline and an increase in credit card use may lead to a rise in average consumer debt over the coming years.
Consumer debt increased by $18.4 billion in the second quarter of 2011, which is an increase of 66 percent over the debt load increase seen in the second quarter of 2010. Unfortunately, the addition of debit card fees may mean that this number will continue to grow.
Catherine New asks consumers what their plans are now that debit card fees are being implemented at several banks. Her article on DailyFinance.com has already drummed up more than 500 comments with many individuals planning to switch from a mega bank to a credit union.
In this SeattlePI.com article, Todd Pietzsch with BECU comments on the influx of customers to Washington’s largest credit union, “"I think there's a lot of consumers realizing there are other options out there." Evidently the credit union was eyeing a new record in memberships on Friday and while it may just be coincidence that this happened right after B of A announced its new fee structure, my vote is that it was anything but a coincidence.
If you’re a B of A customer, what are you future banking plans?