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Entries in Debit Card Fees (12)

Monday
Jan232012

Bank of America Debit Fee Plan Led to 20% Jump in Closed Accounts

Jin Lee/Bloomberg via Getty Images(CHARLOTTE, N.C.) -- The days of the easy fee grab may be coming to an end. Bank of America’s failed plan to impose a $5 monthly debit card fee led to a 20 percent increase in closed accounts in the last three months of 2011 and a public relations headache, which other companies may be keen to avoid.

Asked about the fee debacle in a conference call with investors last week, Bank of America CEO Brian Moynihan said, “So I’d say that yes, we had some impact from the $5 debit fee. That’s why we made a decision to reverse it.”

The incident may lead to companies thinking again before levying fees on services that have traditionally been free. Verizon Wireless canceled a $2 fee for single bill-pay transactions online or via telephone in December, just one day after the telecommunications company announced the fee.

During an earnings conference call on Thursday, Moynihan revealed the $5 debit card monthly fee, proposed in late September and rescinded just one month later after public outcry from customers, led to an, “elevated level of account closings in the quarter” -- a 20 percent jump in the fourth quarter of 2011 compared with 2010.

Bank of America reported earnings of $2 billion in the last three months of 2011, up from a net loss of $1.2 billion in the same period a year ago, boosted in part from a one-time gain on the sale of China Construction Bank.

Copyright 2012 ABC News Radio

Tuesday
Dec062011

Save Money by Paying Less for Credit; Negotiate with Your Bank

Brand X Pictures/Thinkstock(NEW YORK) -- After successfully shaming banks into giving up debit card fees, now grass roots groups are urging consumers to switch out of high-interest credit cards.  They're calling Dec. 11 "Balance Transfer Day."

As ABC News' consumer correspondent Elisabeth Leamy notes in her book Save Big, there are two ways to save on credit: to use less of it or to get it for less.  Switching to a card with a lower interest rate is an example of getting credit for less.

However, Bill Hardekopf, the CEO of LowCards.com, warns, "Getting a lower credit card rate may not be as easy as transferring your account to another bank.  The rates you receive are based on your credit score.  If your score is low, then your interest rates are going to be higher and you are going to have fewer options."

If you do have a balance transfer offer in hand that gives you a lower interest rate, go for it.  Just be wary of high balance-transfer fees.  Sometimes these fees are substantial enough that they negate the benefit of the lower rate you just snagged.

But there is one other option: You can often negotiate for a lower interest rate with your current bank.  All you have to do is call up your credit card company and ask them to lower your interest rate.  As an incentive for them to comply, you should also mention that other card companies have offered you a lower rate, so if this company doesn't help you, you will take your business elsewhere.

Those simple phone calls can make a big difference in how much and how long it takes to pay off your credit cards.  In this post-recession economy, you may not be able to achieve as big an interest rate cut, but the fact remains that it is easier for a bank to keep a current customer than to get a new one, so it's quite possible the bank will work with you.

Copyright 2011 ABC News Radio

Monday
Dec052011

Could ATM Ads Replace Surcharges?

Hemera/Thinkstock(NEW YORK) -- ATM users could soon be able to opt out of ATM surcharges by agreeing to watch an advertisement in the same amount of time it takes for a typical transaction.

Clinton Townsend, a 25-year old Brooklyn, N.Y., resident from New Jersey, is the founder and CEO of Free ATMs NYC.  He created an ATM that uses targeted advertisements to cover the cost of the surcharge of an ATM outside its network. And, Townsend assures, the transactions don't take any longer than they would without the commercial.

The ad plays during the time the screen's message indicates a transaction is processing, typically 10 seconds or less, Townsend said. Or customers can choose not to view the ad and pay an ATM surcharge of $3.

And at the bottom of the ATM receipt there might be a coupon that can be torn off and redeemed at a local business.

Though Townsend has plans to expand through the New York area and eventually beyond, his first and only ATM for now is in a music venue and bar in Brooklyn called the Knitting Factory.

"I've heard nothing but good things from customers," general manager Bob Reiter, who has hosted the ATM since Nov. 4, said.  "I've had a lot of people who come in not for the bar or a show but just to use the ATM.  It's been good for business."

Reiter said he has used the ATM himself and found it "pretty simple."

"I didn't find it any more difficult than any other ATMs," he said. "Instead of a screen that tells you it's processing, it gives you an advertisement.  I hardly noticed there was an ad there."

Townsend has two ATM models: One has a 10.2 inch main screen through which transactions would be conducted and the short advertisement viewed, and the other would have a 15-inch LCD screen above that shows a looping video advertisement.

A 2008 graduate of Morehouse College in Atlanta with a degree in finance, Townsend is mum on the company's specific plans, although he said he planned to "aggressively roll out" additional ATMs and hire employees.

Copyright 2011 ABC News Radio

Monday
Nov142011

After Debit Card Uproar, Banks Look to Sneaky Fees

Stockbyte/Thinkstock(NEW YORK) -- After an uproar of protests, the largest banks have said they are not going to charge customers for debit card purchases, but hidden overdraft, ATM and other fees are likely to rise, say consumer advocates.

For years, banks have had an arsenal of fees they could charge consumers to increase revenues, said Ed Mierzwinski, consumer program director  of U.S. Public Interest Research Group, which published a report, Big Banks, Bigger Fees, earlier this year.

Mierzwinski said he believes banks are offering more a la carte services from what used to be one package offered to consumers. He said the trend is similar to what telephone companies have done over the years.

“They’re un-bundling what used to be part of service and charging you more for it,” he said. “Everybody blames Durbin. That’s hooey.”

The Durbin amendment of the Dodd-Frank Act capped fees banks charge merchants when customers make debit card purchases to about 21 cents. Before the amendment was implemented on Oct. 1, the average fee banks charged merchants was 44 cents per transaction.

“The Durbin amendment got rid of unfair fees that forced cash customers to subsidize bank customer rewards,” he said.

Another fee that could be on the rise is the charge to use another bank’s ATM, Mierzwinski said, not to be confused with an ATM’s surcharge. ATM operators are required to acquire consent that users will be charged surcharge of around $3 for using an ATM not owned by their bank.

Consumers usually see another $2 on their monthly balance statement charged by their banks, but that is likely to rise by another 50 cents or more.

Banks may be increasing the fees quietly without your knowledge, the New York Times reported, even charging $5 to $20 to replace a lost debit card.

The 10 biggest banks disclose an average of 49 service fees, according to the Pew Charitable Trusts’ Safe Checking in the Electronic Age project, which was launched a year ago.

The most common fees not disclosed on the websites of the biggest banks were in the category of overdraft penalty fees, according to Pew’s report published in April, Hidden Risks: The Case for Safe and Transparent Checking Accounts.

Ardie Hollifield, project manager of the Pew project said it is unclear if fees have increased in the recent months related to plans to halt debit card purchase fees. Bank of America canceled plans last month to charge customers $5 a month for making purchases with their debit card. Chase and Wells Fargo have stopped testing their $3 fees in limited markets.

Pew intends to publish an updated report next year.

The current report recommends that the Consumer Financial Protection Bureau require banks to publish a one-page disclosure box of their fees, similar to the “Schumer” disclosure box for credit cards, named after Sen. Charles Schumer, D-N.Y. The median length of a bank’s disclosure describing fees is 111 pages, according to Pew.

“The disclosure box is real-world solution for consumers to figure out the fee,” she said, adding that Pew proposes it be made available at least on bank websites.

Copyright 2011 ABC News Radio

Tuesday
Nov012011

Bank of America Cancels $5 Fee

Jin Lee/Bloomberg via Getty Images(CHARLOTTE, N.C.) -- Bank of America has dropped its planned $5 monthly debit card fee, in a complete reversal of its announcement late September that attracted a maelstrom of customer anger.

"We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee," David Darnell, co-chief operating officer, said in a statement Tuesday. "Our customers' voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so."

After Bank of America, based in Charlotte, N.C., announced the planned fee, customers expressed outrage, including a petition signed by 153,000 customers across the country threatening to leave the bank if the fee were implemented.

The company said Friday it was planning to offer more choices for customers to avoid the fee, although it was still planning to go through with the charge next year. A person familiar with the matter had said customers could avoid the fee if they maintain minimum balances, deposit paychecks directly or use Bank of America credit cards.  

Copyright 2011 ABC News Radio

Friday
Oct282011

Bank of America Backs Down; Big Banks Say No to Debit Fees

Jin Lee/Bloomberg via Getty Images(CHARLOTTE, N.C.) -- Bank of America is reportedly backing down from its $5 debit card fee, giving customers more ways to avoid the fee.

Meanwhile, JPMorgan Chase has decided it will not charge customers who use their debit cards for purchases. JPMorgan Chase, Citigroup, U.S. Bank, PNC Financial, and Key Bank have confirmed they are not planning to charge customers debit card fees when they make purchases.

JPMorgan Chase, the largest bank in the country by total assets, began testing a $3 fee in parts of Wisconsin and Georgia in February. However, the bank decided it won't roll out the fee to the rest of the country, as first reported by the Wall Street Journal.

A person familiar with Chase confirmed with ABC News that it is not planning to charge debit card fees due to customer preferences.

Many in the banking industry had warned that higher fees to consumers would follow the Dodd-Frank's Durbin Amendment, which went into effect on Oct. 1. The amendment capped debit card interchange fees for merchants at 21 cents per transaction earlier this year. Before the amendment, debit card companies charged merchants an average interchange fee of 44 cents per transaction.

The $5 monthly debit card fee announcement at the end of September from Bank of America, the second-largest bank in the country, led to outcry among politicians and consumers. The response included a petition against Bank of America's plans. The petition had over 153,000 signatures from irate customers across the country.  

Copyright 2011 ABC News Radio

Monday
Oct242011

Consumers, Small ATM Networks Fight Against ATM Fees

Goodshoot/Thinkstock(WASHINGTON) -- Consumers are fed-up with not just Bank of America's debit card fees but other banks' ATM fees as well: three anti-trust lawsuits are alleging Visa and MasterCard, the largest card networks, are unfairly "fixing" prices against both consumers and independent ATM providers.

In the most recent suit filed on Oct. 18, one man from New Jersey, Justin Genese, is proposing a class action against the top providers of automated teller machine (ATM) services for "orchestrating, implementing, and facilitating a conspiracy to fix the prices for ATM access fees."

An ATM user who obtains money from a machine not belonging to their bank is notified on the ATM's screen about a $2.50 fee or more surcharge.

Genese's suit is against Visa, MasterCard, Bank of America, J.P. Morgan Chase, Wells Fargo and two other financial companies, alleging that customers have "been forced to pay artificially inflated, supra-competitive ATM Access Fees" to the bank defendants and "bank co-conspirators."

All three suits, filed in the District of Columbia, say the largest ATM providers and other financial institutions are unfairly restricting market movement by preventing ATMs from charging different fees to consumers based on their type of debit card.

A similar suit filed by 14 independent ATM providers on Oct. 12 alleges that Visa and Mastercard are restricting competition by forcing them to charge all their users the same fee, regardless of their type of debit card.  The plaintiffs include ATM operators not affiliated with banks, including the National ATM Council, a trade association, and ATMs of the South.

The suit alleges that Visa, MasterCard and their member banks "have misused this power to fix the access fee for any transaction at a given ATM or terminal to be no less than the amount charged at that ATM or terminal for a Visa or MasterCard transaction...without regard to any cost saving to the ATM operator of obtaining service from one of the alternative PIN-based networks."

"The ATM restraints, therefore, effectuate horizontal price fixing that is unlawful per se," the suit alleges.

"If there was a truly competitive market, the levels of the fees would be lower," Jonathan Rubin, attorney for the ATM providers said. "They're in the business of selling convenience."

About half of the 400,000 ATMs in the country are operated by providers not affiliated with banks, according to Rubin.  He said his clients earn revenue by charging a surcharge to customers and a back-end switch fee.

Jim Issokson, MasterCard spokesman, said "the claims challenging certain MasterCard ATM rules are without merit."

"These rules were put in place to protect consumers from ATM operators seeking to impose discriminatory surcharges on our cardholders," he said.  "We believe these important consumer protections must be preserved and we will vigorously defend against the claims brought against us."

Lisa Westermann, a Wells Fargo spokeswoman, said, "We believe the allegations of the complaint are without merit and plan to vigorously defend the case."

Spokesmen for Visa and Bank of America declined to comment.  JP Morgan Chase did not respond to a request for comment.

Copyright 2011 ABC News Radio

Monday
Oct102011

Is Bank of America’s $5 Monthly Debit Card Fee Fair?

Davis Turner/Getty Images(NEW YORK) -- Is Bank of America’s plan to charge customers who use their debit card for payments $5 a month starting next year reasonable in terms of what such transactions cost the bank?

That depends on the math and the customer’s spending habits. 

If a customer uses a debit card 25 times a month at Bank of America and each transaction nets the bank a 21-cent fee, that’s $4.75. Under the old rules, before the decrease in debit card fees from an average of 44 cents each went into effect Oct. 1 under the Dodd-Frank Act’s Durbin Amendment, the bank would have netted $10.

Maria Aspan, consumer finance editor with the newspaper American Banker, notes that a customer making 25 debit card transactions each month would indeed cause the bank to lose $5 it would have made before the Durbin Amendment -- which some bank sources publicly blamed for the fee.

A banking survey from the Federal Reserve from June found that the average, or mean, per respondent of total processing costs for all types of debit card transactions, including those on prepaid cards, was 17 cents. That 17 cents does not include fraud settlement or other services.

If a bank’s overhead costs are 17 cents a transaction on average, and they are capped in charging customers a maximum of 24 cents per purchase, it could make a profit of 7 cents for each transaction.

For heavy debit card users, the $5 at least makes some sense. Customers who only use their debit cards a few times a month to make purchases may find the fee harder to swallow.

Copyright 2011 ABC News Radio

Wednesday
Oct052011

Banks Fire Back at President Obama over Debit Card Fees

ABC News(WASHINGTON) -- The American Bankers Association is firing back at President Obama for his comments in an interview about bank fees, including Bank of America's move to add a monthly fee for customers to use its debit cards.

With customers outraged over Bank of America's announcement last week that it will charge a $5 monthly fee for debit card purchases, ABC News' George Stephanopoulos asked President Obama on Monday if he could put a stop to the fees.

"What the banks are saying is -- that 'Rather than take a little bit less of a profit.  Rather than paying multimillion dollar bonuses.  Let's treat our customers right.'  And this is exactly why we need this Consumer Finance Protection Bureau that we set up that is ready to go," the president said.

The president said he hopes banks will decide that raising fees for consumers is "not good practice."

Frank Keating, CEO of the bankers' trade group, said in response that "it's disappointing and puzzling that the president would attack a private corporation for responding to price fixing that has fundamentally altered the economics of offering a debit card."

What's more, Keating blames the president's own party for authorizing the fees in the first place, pointing to legislation created by Senator Dick Durbin (D-Ill.). "As a direct result of the Durbin Amendment, consumers have started paying for financial services they previously enjoyed free of charge," Keating said in an emailed statement.  "Unfortunately, this proves that whenever government tries to control pricing of a product or service, consumers lose."

But Norma Garcia, manager of Consumers Union's financial services program, said the $5 fee is not necessarily a direct result of the Durbin Amendment, which limited the transaction, or interchange, fee credit card companies can charge merchants to about 21 cents.

"Even with the new interchange fee cap, banks are still collecting enough money from retailers to cover the costs of debit card transactions," Garcia said.  "Bank of America's $5 debit card fee appears designed to generate extra income for the bank rather than simply covering the costs of providing debit services.  Customers who are unhappy with the fee should consider switching to another bank."

A spokeswoman for Bank of America, which has struggled with a declining stock price and a host of bad mortgages after acquiring Countrywide, has said the "economics of offering a debit card have changed with recent regulations."

Bank of America, based in Charlotte, N.C., will waive debit card charges on premium accounts and for Wealth Management/Merrill Lynch and US Trust clients.  Customers will still be able to get cash through ATMs, use online bill pay and mobile phones for free.

The company's website is still experiencing sporadic issues, which the company denies is related to the fee announcement or hacking.

It is unclear if other banks will follow suit and implement debit card fees.  Chase and Wells Fargo are testing $3 fees in limited markets, but both banks say they have no immediate plans to roll-out debit card fees nationwide.

Copyright 2011 ABC News Radio

Tuesday
Oct042011

Bank of America Site Experiences Delays for Second Straight Day

Davis Turner/Getty Images(CHARLOTTE, N.C.) -- For the second consecutive business day, the Bank of America homepage was down Monday, following spotty service this weekend.

Bank reps insisted that the website was not down because of hackers or malware, but because of traffic.

That server-busting traffic by some of Bank of America's 29 million online customers immediately followed the bank’s announcement of a $5 monthly fee it was imposing for debit card usage.  Time magazine’s blog implied much of that traffic was heading toward the exit, calling the debit card fee a “New-Coke level blunder.”

A Bank of America spokesperson told ABC News on Monday that “Online banking is not down.  Most customers are able to bank.  We have simply taken some proactive measures to manage customer traffic during peak hours during the day, which may result in some customers experiencing slowness or access issues.”

There’s no way to tell how many Bank of America customers are actually closing their accounts, or if that is indeed what’s happening.

Copyright 2011 ABC News Radio







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