The American banking industry, which has been raising fees and doing away with free services, has a new target: debit-card users.
Bank of America Corp. is laying plans to charge millions of customers a $5 monthly fee to use their debit cards, and other big banks are expected to follow suit. The industry says it needs the fees to recoup revenue it will lose because of new government regulations that cap what they can charge merchants for debit-card transactions.
Bank of America, the largest U.S. bank by assets, disclosed the plan on Thursday in a memo to its senior staff. It intends to begin collecting the fees nationwide early next year.
New federal limits on debit-card "swipe fees" are expected to cost U.S. banks an estimated $6.6 billion a year in lost revenue.
To offset that lost revenue, many banks have eliminated or scaled back debit-rewards programs, added monthly fees for checking accounts and raised minimum balance requirements for customers to avoid certain fees.
The limits on debit-card swipe fees—one of the most contentious regulations to arise from the financial crisis—were finalized by the Federal Reserve Board in June and take effect on Saturday. The new rules will cap at 24 cents the fee merchants pay banks each time a customer buys something with a debit card, down from the current average of 44 cents. The rules apply to banks with $10 billion and more in assets.
The fee will apply to standard checking accounts, but not most premium accounts held by affluent customers. Banks typically exempt their premium accounts from many fees because they tend to be more profitable than standard accounts with lower balances.