Dropping Fees, But Still Looking for Revenue

Bank of America protestersLast month, Bank of America announced that it would begin charging a $5 monthly fee  for consumers to use their debit card accounts. Only those with $20,000 or more in their accounts or whose mortgage was held by Bank of America would be exempt from the fee. In this regard the fee would have a disproportionate negative effect on low-income consumers who do not have large sums in their accounts and typically are homeowners.

Under public pressure, including pressure from the Occupy Wall Street movement, which is protesting the fact that the very banks that got bailed out that are now turning around and hiking fees, Bank of America backtracked and announced it would not charge the fee. Bank of America was the most recent bank to back away from plans to charge customers a monthly fee for using their debit cards—JPMorgan Chase & Co. and Wells Fargo & Co. also decided to cancel test programs, while SunTrust Banks, Inc. and Regions Financial Corp. stated on October 31st that they would end monthly charges and reimburse customers.

Although Bank of America dropped the fee, the blacklash from the public continues. The Occupy Wall Street movement, along with other advocacy groups, called for a Bank Transfer Day on Saturday, November 5th, 2011, encouraging customers of large banks to move funds into credit unions and small local banks. According to the Credit Union National Association, credit unions signed up 650,000 new customers since the concept of Bank Transfer Day was announced on September 29—double their normal rate.

Amidst bank threats to charge extra fees, U.S. Bank introduced the Convenience Cash Card, a low-cost prepaid card. The Convenient Cash Card is a reloadable prepaid card that allows cardholders to make purchases wherever Visa® debit is accepted. According to U.S. Bank, unlike other prepaid products, U.S. Bank cardholders can add funds to the Convenient Cash Card at any U.S. Bank branch and withdraw money from any U.S. Bank ATM free of charge.

As banks continue to look for new products and services to make up for lost revenue due to the passage of the Dodd-Frank Act, which caps interchange fees or “swipe fees” on debit cards, Americans are, or should be, hyper acute to fees put on their cards and bank accounts. U.S. Bank’s Convenience Cash Card is no different. Although the bank’s website claims free deposits and ATM withdrawals, it does not explicitly outline other possible fees, aside from the $3 fee to buy the card. Even the fine print doesn’t lay out the fees; it merely says a consumer will receive a fee schedule upon obtaining the prepaid card. Learning after the fact what fees they will really be charged does not allow consumers to gauge if the card is an affordable choice.

Whether banks are truly introducing prepaid cards to provide an affordable solution for the unbanked or whether it’s simply another attempt to increase lost revenue is debatable. Either way, public protests are being heard. Many changes are still needed, but people aren’t giving up. The $5 fee might be gone, but consumers have not forgotten the actions of the big banks, the bailouts, and the fallout that occurred because of all of it.  Protesters continue to take to the streets, marching on the doorsteps of banks, demanding transparency and fair banking practices. In sum, members of the public are making it clear that their tax dollars helped to bail out banks and that they will not let the same banks continue to generate fees from consumers to increase their profit margins. This is another example of how advocacy and action can make a difference to your pocketbook

This blog post was coauthored by Alison Terkel.

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