Bank of America to charge debit fees

Bank of America plans to start charging many customers a $5 monthly fee for using their debit cards to make purchases. The fee will be rolled out starting early next year.

A number of banks are already either imposing or testing such fees. But Bank of America's announcement carries added weight because it is the largest U.S. bank by deposits.

Anne Pace, a Bank of America Corp. spokeswoman, said Thursday that customers will only be charged the fee if they use their debit cards for purchases in a given month. Customers won't be charged if they only use their cards at an ATM.

The fee will be waived, she said, for customers who sign up for a new premium checking account planned for 2012 -- one way to qualify would be to maintain a combined balance of $20,000 or more as well as for customers who belong to the bank's "Platinum Privileges" rewards program, which has even higher requirements.

The debit card fee will apply to basic accounts and will be in addition to any existing monthly service fees. For example, one of the bank's basic accounts charges a $12 monthly fee unless customers meet certain conditions, such as maintaining a minimum average balance of $1,500.

A fee for using debit cards is still a novel concept for many consumers and was unheard of before this year. SunTrust, a regional bank based in Atlanta, began charging a $5 debit card fee on its basic checking accounts this summer. Chase and Wells Fargo are also testing $3 monthly debit card fees in select markets. Neither bank has said when it will make a final decision on whether to roll out the fee more broadly.

Bank of America is initiating the fee as a result of recent regulations that raise the cost of offering debit card services, Pace said. "We had to adjust the pricing to reflect the new economics."

That change, part of the Wall Street Reform and Consumer Protection Act, would be the 21-cent cap placed on what banks can charge retailers when they process a debit card transaction, known as a swipe fee, said John Ulzheimer, president of consumer education at SmartCredit.com, a Costa Mesa, Calif.-based credit monitoring service. Retailers, not consumers, pushed for this cap, he said, "and now it's going to cost the consumer more."

That cap goes into effect tomorrow. Swipe fees paid by retailers 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 fees that banks can collect from merchants when customers use their credit cards, however. That means banks may increasingly encourage customers to reach for their credit cards, reversing a trend toward debit card use in the past several years.

Ulzheimer said consumers who are unhappy over paying the new fee can consider taking their business to another bank or to a credit union that doesn't charge such fees.

With Patricia Kitchen