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The debit card future–or not

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An internal management memo says Bank of America plans on charging customers a $5 monthly fee for making debit-card purchases starting early next year, according to the Wall Street Journal.

The U.S. banking behemoth wants to make up some of the revenue it expects to lose when the lower cap on fees merchants pay on customer debit card transaction. The Federal Reserve Board reduced the fee cap from 44 cents to 24 cents per transaction.

The fee will apply to customers with various checking accounts during any month they use their debit card to make a purchase. The fee will not apply to customers who do not use their debit card to make a purchase or who only use it to make ATM transactions> .

BofA isn’t alone. Several larger banks are experimenting with debit card fees For instance, Wells Fargo will start testing in October a $3 fee for debit and ATM cards in several states. The jury is still out.

Will customers accept the new fee? Debit cards are popular. The electronic check is convenient. It’s a good spending discipline for a nation struggling to save more and borrow less. And the bank appetite for fees is enormous. A recent survey notes that both interest and noninterest checking accounts posted big increases in monthly service fees and the balances required to avoid them.

Still, I doubt the debit-card fee will sweep the industry. The survey by Bankrate notes that debit card fees are still rare with only 4% of accounts charging a point-of-sale fee when using a debit card. Less than 2% charge a monthly or annual fee for carrying a debit card.

It won’t be a popular charge. There are still many competitors in the industry that haven’t embraced the fee. My guess is that customers who like using their debit card could well decide to take their business elsewhere.

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