Bank of America became the latest US bank to scrap plans for a debit card fee, acting after worries that customers of the second-largest US bank by deposits would move their accounts.
BofA said its u-turn was a “response to customer feedback and the changing competitive marketplace”. Analysts had worried that BofA could see deposits shift to other banks, denying it a source of liquidity strength.
The $5-a-month fee was proposed last month in response to new financial regulations that cap the amount retailers are charged for processing transactions. Banks have said the new rules, part of last year’s Dodd-Frank financial reforms, will cost them hundreds of millions of dollars and will end up benefiting retailers but not consumers.
The rule, which was set by the US Federal Reserve and came into force last month, caps the so-called “interchange fee” at about 24 cents for an average debit card transaction, a significant decline from previous charges.
After a fierce reaction from the public and politicians, most large banks have said they will not make up for the profit hit with a debit card fee on consumers. Wells Fargo said last week that it was cancelling a pilot scheme to test a $3-a-month charge. JPMorgan Chase and Citigroup have also decided against a charge.