JP Morgan Grudgingly Capitulates to Angry Mob of Peasants. Debit Monthly Fee is Out.
Bankers to Find Other Deceptive Ways to Get More Money.
Big Banks Blink on New Card Fees
A month after Bank of America got pummeled by consumers and politicians for introducing plans for new debit-card fees, most other big U.S. banks are steering clear of imposing similar charges.
Following eight months of consumer testing, J.P. Morgan Chase & Co. has decided that it won't charge customers who use their debit cards to make purchases, according to a person familiar with the bank's plans. The New York bank's Chase retail unit is one of the largest U.S. consumer banks, with 26.5 million checking accounts and 5,300 branches.
J.P. Morgan joins U.S. Bancorp, Citigroup Inc., PNC Financial Services Group Inc., KeyCorp and other large banks that have said in recent days that they won't impose monthly fees on debit cards. None of those banks said they made their decisions because of the outcry over Bank of America's fees."We looked at all options and quickly decided it didn't fit with our overall strategy," said David Bowen, who runs the consumer-product business at Cleveland-based Key, which ranks among the 20 largest banks in the country.
Banks are loading fees onto customer accounts in an attempt to recover billions of dollars in revenue that will be lost from new restrictions
on debit cards, credit cards and overdrafts. Most big banks have already eliminated free checking for customers who don't meet certain criteria on their accounts, such as minimum balances or a certain number of direct deposit transactions.
Bank of America Corp. has begun laying plans to charge millions of customers $5 a month if they use their debit cards to make purchases. The bank is still working out details of its plans, which likely won't affect all customers, according to a person familiar with the situation. SunTrust Banks Inc., Atlanta, is also tacking a $5 monthly fee on some debit-card users, while Regions Financial Corp. of Birmingham, Ala. is charging $4 a month on some accounts.
Wells Fargo & Co. is testing a $3 monthly debit-card fee in five states.
The debit-card fees stem from a provision in last year's Dodd-Frank financial-overhaul law that reduced by roughly half the amount that banks are permitted to charge merchants for debit-card transactions. Merchants had long complained that they were being charged too much to accept debit cards, which are typically used instead of cash and checks.
Banks are expected to lose more than $6 billion in annual revenue as a result of the new rules, according to industry estimates.
The debit-card fees have sparked an outcry among politicians-including members of Congress and President Obama-as well as customers, who have threatened to close their bank accounts and move to other institutions.
Community banks and credit unions are tapping into that fury by encouraging consumers to move to small institutions that don't charge
such fees. Bethpage Federal Credit Union in New York, for example, said this week it signed up 1,500 customers-twice its normal rate-since Bank of America's plans became public.
Other big banks say they determined debit-card fees would cost them as well. "Our customers said that would be a massive source of irritation for them," said Stephen Troutner, Citigroup's head of consumer and small business banking. "Any time you hear that kind of emphatic feedback from customers, you've got to listen to them."
Many banks will likely increase charges in other areas to make up the lost revenue but some banks said they will focus on winning over more customers and convincing them to sign up for more financial products.
Todd Barnhart, head of retail products at Pittsburgh-based PNC, said debit cards are essentially an extension of checking accounts and that consumers don't view them as a separate product.
"I generally think customers don't want to be nickled and dimed," he said.
Indeed, consumers expressed relief that the debit-fee trend is not spreading widely.
"It's not about the money. It's about 'are you kidding me?'" said Amanda Peterson of San Francisco, who banks with U.S. Bancorp. She said she would have "immediately" switched banks if the Minneapolis-based lender had started charging for debit cards.
Chase was one of the first big banks to explore monthly fees on debit cards. The bank began testing monthly fees of $3 in Wisconsin and Georgia in February. Those tests are scheduled to end in mid-November and won't be renewed or expanded for now, said the person familiar with the bank's plans.
Sen. Richard Durbin (D., Ill.), who wrote the provision which reduced merchant debit-card fees, sent a letter to Wells Fargo Chief Executive
John Stumpf last week complaining about the bank's new charges. "It is certainly surprising that your bank would pursue this fee strategy in light of the consumer reaction that has been prompted by Bank of America's recent imposition of a monthly debit fee on its customers. If you were hoping that your new fee would go unnoticed, it has not," he wrote.
In a statement, Wells Fargo said, "We regularly review our pricing and take into account the needs of our customers, industry trends, the market competition and our cost of doing business."
JPMorgan Chase Decides Against Charging A Debit Card Fee After All
Some big banks are beginning to decide that charging a debit card fee may lead to more trouble than it's worth.
JPMorgan Chase has decided it isn't going to charge customers to use their debit cards for purchases, after eight months of testing the program, the Wall Street Journal reports. The bank -- which is one of the biggest consumer banks, according to the WSJ -- is just the latest to decide not to charge for debit card use; Citigroup, PNC, U.S. Bankcorp and KeyCorp also recently announced that they would stay away from debit card fees.
This isn't the first fee JPMorgan Chase has decided against after consumer testing. The bank tested ATM fees on non-network customers earlier this year, charging $5 in Illinois and $4 in Texas, but eventually discontinued the plan.
Bank of America roiled customers when the bank announced last month that it would charge customers $5 per month to use their debit card for purchases starting in 2012. Wells Fargo announced in August that it would start testing a $3 debit fee for purchases this fall.
After Bank of America announced the debit card fee, critics took to Twitter and lambasted the new charge. President Barack Obama also derided the fee saying in an interview with ABC News that big banks don't have a right to mistreat their customers.
The banking industry immediately lashed out at Obama's comments, claiming new financial regulations had forced the banks' hand.
Either way, customers are showing that they feel the pain. One-third of consumers said they would leave their bank if it instituted a debit card fee, in a recent survey. New account openings at the nation's largest credit union were up by more than 20 percent the weekend after Bank of America announced the fee.
Still, none of the banks shying away from debit card fees said that the reaction to the Bank of America fee influenced their decision, according to the WSJ.
Brian Moynihan, Bank of America's CEO, said in an employee town hall meeting last week that he's been getting "incensed" at those who criticize his bank because they don't know "how much good" his employees do.
Moynihan also defended the debit card fee earlier this month saying that his bank has a right to make a profit.
Banking industry officials have said that they need to start charging fees for once-free checking account services to make up for revenue lost as a result of financial reform regulations. Though Citibank does not plan to charge customers for using their debit cards, Citibank will charge certain customers as much as $20 per month for low account balances.
Despite the regulations, Bank of America raked in $6.2 billion in profits last quarter, up from a $7.3 billion loss during the same quarter last year.
Big Banks Blink on New Card Fees
A month after Bank of America got pummeled by consumers and politicians for introducing plans for new debit-card fees, most other big U.S. banks are steering clear of imposing similar charges.
Following eight months of consumer testing, J.P. Morgan Chase & Co. has decided that it won't charge customers who use their debit cards to make purchases, according to a person familiar with the bank's plans. The New York bank's Chase retail unit is one of the largest U.S. consumer banks, with 26.5 million checking accounts and 5,300 branches.
J.P. Morgan joins U.S. Bancorp, Citigroup Inc., PNC Financial Services Group Inc., KeyCorp and other large banks that have said in recent days that they won't impose monthly fees on debit cards. None of those banks said they made their decisions because of the outcry over Bank of America's fees."We looked at all options and quickly decided it didn't fit with our overall strategy," said David Bowen, who runs the consumer-product business at Cleveland-based Key, which ranks among the 20 largest banks in the country.
Banks are loading fees onto customer accounts in an attempt to recover billions of dollars in revenue that will be lost from new restrictions
on debit cards, credit cards and overdrafts. Most big banks have already eliminated free checking for customers who don't meet certain criteria on their accounts, such as minimum balances or a certain number of direct deposit transactions.
Bank of America Corp. has begun laying plans to charge millions of customers $5 a month if they use their debit cards to make purchases. The bank is still working out details of its plans, which likely won't affect all customers, according to a person familiar with the situation. SunTrust Banks Inc., Atlanta, is also tacking a $5 monthly fee on some debit-card users, while Regions Financial Corp. of Birmingham, Ala. is charging $4 a month on some accounts.
Wells Fargo & Co. is testing a $3 monthly debit-card fee in five states.
The debit-card fees stem from a provision in last year's Dodd-Frank financial-overhaul law that reduced by roughly half the amount that banks are permitted to charge merchants for debit-card transactions. Merchants had long complained that they were being charged too much to accept debit cards, which are typically used instead of cash and checks.
Banks are expected to lose more than $6 billion in annual revenue as a result of the new rules, according to industry estimates.
The debit-card fees have sparked an outcry among politicians-including members of Congress and President Obama-as well as customers, who have threatened to close their bank accounts and move to other institutions.
Community banks and credit unions are tapping into that fury by encouraging consumers to move to small institutions that don't charge
such fees. Bethpage Federal Credit Union in New York, for example, said this week it signed up 1,500 customers-twice its normal rate-since Bank of America's plans became public.
Other big banks say they determined debit-card fees would cost them as well. "Our customers said that would be a massive source of irritation for them," said Stephen Troutner, Citigroup's head of consumer and small business banking. "Any time you hear that kind of emphatic feedback from customers, you've got to listen to them."
Many banks will likely increase charges in other areas to make up the lost revenue but some banks said they will focus on winning over more customers and convincing them to sign up for more financial products.
Todd Barnhart, head of retail products at Pittsburgh-based PNC, said debit cards are essentially an extension of checking accounts and that consumers don't view them as a separate product.
"I generally think customers don't want to be nickled and dimed," he said.
Indeed, consumers expressed relief that the debit-fee trend is not spreading widely.
"It's not about the money. It's about 'are you kidding me?'" said Amanda Peterson of San Francisco, who banks with U.S. Bancorp. She said she would have "immediately" switched banks if the Minneapolis-based lender had started charging for debit cards.
Chase was one of the first big banks to explore monthly fees on debit cards. The bank began testing monthly fees of $3 in Wisconsin and Georgia in February. Those tests are scheduled to end in mid-November and won't be renewed or expanded for now, said the person familiar with the bank's plans.
Sen. Richard Durbin (D., Ill.), who wrote the provision which reduced merchant debit-card fees, sent a letter to Wells Fargo Chief Executive
John Stumpf last week complaining about the bank's new charges. "It is certainly surprising that your bank would pursue this fee strategy in light of the consumer reaction that has been prompted by Bank of America's recent imposition of a monthly debit fee on its customers. If you were hoping that your new fee would go unnoticed, it has not," he wrote.
In a statement, Wells Fargo said, "We regularly review our pricing and take into account the needs of our customers, industry trends, the market competition and our cost of doing business."
JPMorgan Chase Decides Against Charging A Debit Card Fee After All
Some big banks are beginning to decide that charging a debit card fee may lead to more trouble than it's worth.
JPMorgan Chase has decided it isn't going to charge customers to use their debit cards for purchases, after eight months of testing the program, the Wall Street Journal reports. The bank -- which is one of the biggest consumer banks, according to the WSJ -- is just the latest to decide not to charge for debit card use; Citigroup, PNC, U.S. Bankcorp and KeyCorp also recently announced that they would stay away from debit card fees.
This isn't the first fee JPMorgan Chase has decided against after consumer testing. The bank tested ATM fees on non-network customers earlier this year, charging $5 in Illinois and $4 in Texas, but eventually discontinued the plan.
Bank of America roiled customers when the bank announced last month that it would charge customers $5 per month to use their debit card for purchases starting in 2012. Wells Fargo announced in August that it would start testing a $3 debit fee for purchases this fall.
After Bank of America announced the debit card fee, critics took to Twitter and lambasted the new charge. President Barack Obama also derided the fee saying in an interview with ABC News that big banks don't have a right to mistreat their customers.
The banking industry immediately lashed out at Obama's comments, claiming new financial regulations had forced the banks' hand.
Either way, customers are showing that they feel the pain. One-third of consumers said they would leave their bank if it instituted a debit card fee, in a recent survey. New account openings at the nation's largest credit union were up by more than 20 percent the weekend after Bank of America announced the fee.
Still, none of the banks shying away from debit card fees said that the reaction to the Bank of America fee influenced their decision, according to the WSJ.
Brian Moynihan, Bank of America's CEO, said in an employee town hall meeting last week that he's been getting "incensed" at those who criticize his bank because they don't know "how much good" his employees do.
Moynihan also defended the debit card fee earlier this month saying that his bank has a right to make a profit.
Banking industry officials have said that they need to start charging fees for once-free checking account services to make up for revenue lost as a result of financial reform regulations. Though Citibank does not plan to charge customers for using their debit cards, Citibank will charge certain customers as much as $20 per month for low account balances.
Despite the regulations, Bank of America raked in $6.2 billion in profits last quarter, up from a $7.3 billion loss during the same quarter last year.