Bank of America Corp., the biggest U.S. lender by assets, plans to announce a $5 monthly charge for some debit-card users to recoup revenue lost after new federal rules capped so-called swipe fees.
Customers with lower-tiered accounts, including the firm’s online-banking option, may start getting assessed the fee for debit-card purchases in January, said Anne Pace, a Bank of America spokeswoman. Users won’t be charged for cash-machine withdrawals, and clients with premium accounts including those linked to the Merrill Lynch brokerage aren’t affected, she said.
Bank of America, based in Charlotte, North Carolina, is joining rivals including JPMorgan Chase & Co., Wells Fargo & Co. and SunTrust Banks Inc. in rolling out new charges for debit-card users. The Federal Reserve’s rules limiting swipe fees, or interchange, take effect next month. Banking industry representatives have said the changes enrich merchants while penalizing lower-income consumers.
“One of the unintended consequences is that this would disproportionately harm lower-income individuals,” said Trish Wexler, a spokeswoman for the Electronic Payments Coalition, which represents banks and networks. “If you can’t afford $5 a month, you’re going to stop using your debit card.”
The Fed capped debit-card swipe fees at 21 cents starting Oct. 1. It will let issuers tack on five basis points, or 0.05 percent, of each transaction, or almost 2 cents based on the average debit purchase of $38, and a conditional 1-cent adjustment for lenders that follow fraud-prevention standards.
The cap, mandated by the Dodd-Frank Act, replaces a formula that averages 1.14 percent of the purchase price, or about 44 cents. The limit may reduce annual revenue at the biggest U.S. banks by $8 billion, data compiled by Bloomberg Government show.
“The economics of offering a debit card have changed with recent regulations, and we’ve decided to introduce a monthly fee for customers who use their debit cards for purchases,” Pace said today in an interview.
Earlier this year, Bank of America introduced five new accounts where users pay fees unless they keep minimum balances, make regular deposits, use credit cards or take advantage of online services. The offerings are designed to reward clients who have multiple relationships with the bank.
$60 a Year
Only the top two tiers of accounts -- dubbed Premium and Platinum Privileges and requiring $20,000 and $50,000, respectively, in combined balances -- will be spared from the new debit fees, which could total $60 a year per customer, Pace said. Those with an existing account for college students called CampusEdge will also be exempt, she said.
Wells Fargo, the second-biggest debit-card issuer after Bank of America, is testing a $3 monthly debit-card fee in some markets, the lender said last month.
Meanwhile, Citigroup Inc., the third-largest U.S. bank, said this month that it wouldn’t charge additional fees for debit-card use. Ally Financial Inc., formerly known as GMAC, also said it hasn’t increased fees.
“Unlike many of our competitors, we will not charge fees that discourage use or make it unreasonably expensive to take advantage of the tools and services that consumers say are important,” said Stephen Troutner, head of U.S. banking products for Citigroup.
Moves by banks to increase charges “speaks more to the nature of the card industry than to whether swipe-fee reform should have been passed,” Mallory Duncan, general counsel for the National Retail Federation, said in a statement.