After weeks of public backlash, Bank of America announced today that it would cancel plans to charge a $5 monthly transaction fee for debit card purchases.
The bank has been under fire since it announced the fee in late September, further fueling the air of general distrust in major U.S. banks that has become increasingly palpable in the wake of the Occupy Wall Street protests. Earlier this month, Citibank also announced that it would be raising the minimum balance requirement for checking and savings accounts to avoid a monthly fee of $15 or $20, depending on the type of account. Bank of America has cited the so-called “Durbin Amendment” of the Dodd-Frank Act as the reason for imposing the debit card fees. The amendment, which the Senate passed last year, reduced the fees charged to merchants on debit card transactions, thereby limiting banks’ revenue from those purchases.
Many customers, however, have directed their ire at the banks, and the $5 fee announcement has served the breaking point for those already fed up with the practices of large financial institutions. In recent weeks, activists, including those involved in the Occupy Wall Street protests, have been ushering along a growing movement for people to close their accounts with large banks and transfer their money into a local financial institution or credit union. Videos of customers attempting to close their accounts with large banking institutions have gone viral online, and credit unions, the non-profit alternative to banks, have surged in popularity. One group has designated November 5 as “Bank Transfer Day” in an effort to persuade people to switch to credit unions en masse. Another movement, the Move Your Money Project, describes itself as a campaign to “empower individuals and institutions to divest from the nation’s largest Wall Street banks and move to local financial institutions.”
In addition to being the alternative to the “too big to fail” institutions, credit unions are attracting customers in droves because of lower interest rates on consumer loans and credit cards, lower minimum balance requirements for avoiding fees and the increased availability of free checking accounts, which are quickly dwindling from large banks. Whereas large banks have “customers,” credit unions have “members” that collectively own the union. Credit union profits are also reinvested to reward members and provide the services that run the union, while traditional banks primarily operate to benefit shareholders.
The public outcry against major U.S. banks has proven substantial enough to convince many of those banks to scale back plans to charge their own debit card transaction fees. Last week, Wells Fargo and J.P. Morgan Chase both announced that they would halt trial runs of their own debit card transaction fees. SunTrust Banks and Regions Financial Corp also dropped similar fees. But while the cancellation of debit card fees may appease current customers, it may not do much to lure back those whose view of the large banking industry has already soured.