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Fee Freedom May Be Short-Lived

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Five bucks a month wasn’t worth the grief. Bank of America backed off plans to charge a fee for the privilege of using its debit cards Tuesday, citing fury from consumers over the new charge.

The stunning retreat may be a victory for consumers, the Occupy Wall Street protesters who made it one of their many rallying cries, and even President Barack Obama, who openly criticized the measure. But experts warn the banks will search for other ways to make up the 50% reduction in interchange fees merchants pay when purchases are made with debit cards.

“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, BofA co-chief operating officer said in a statement explaining the reversal. Pamela Banks, senior policy counsel for Consumers Union, says the move will embolden bank customers. “The public backlash over debit card fees should serve as a big wake up call to banks,” she says.

Bank of America’s hand may have been forced when other banks backed off similar debit-card fee plans. Odysseas Papadimitriou, the chief executive of CardHub.com, says, “Bank of America was hoping that JP Morgan Chase, Capital One, Wells Fargo and Citibank were going to follow. Banks may be more hesitant to introduce new debit fees now. But they will still have to find ways to increase charges and drive profits.”

As we reported earlier, experts say banks are already toying with creative new fees such as increased checking account charges, inactivity fees on debit cards which aren’t used, charges for paper statements, and higher punitive fees for bounced checks.

Bank of America would not say how it plans to make up the lost revenue. “We will continue to structure our products to ensure that our customers understand what they are getting and how much it costs,” spokeswoman Anne Pace says.

And even free debit cards have their disadvantages. As we’ve previously reported, banks are dropping debit card reward programs. Plus, the cards offer fewer protections than credit cards in cases of fraud or theft. Shoppers might still be better off using cash or credit, or even a prepaid card, which also helps build your credit rating.

Bank of America’s change of heart may also come too late for some customers, who used that fee and other new ones as a rallying cry to switch banks – often a complex job. Shopping around is still a smart idea – many banks and credit unions are offering bonuses for new accountholders, and fewer fees, too. And, lest we forget, many retailers have yet to pass on lower transaction fees on debit cards to their customers. Papadimitriou says, “The net result is a status quo for consumers. They’re no worse or better off.”

(AnnaMaria Andriotis and Kelli B. Grant contributed to this post.)

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    • Thank you Mike for everything you’ve done. Human Civilization will owe you a huge debt of gritutade someday as being the guy who finally broke thru and opened everybody’s eyes. The interview is outstanding… A true professional takes on these issues and sounds like the most polished of policy advisors… Only your policies aren’t corrupt with the greed and petty politics that have brought our republic to the brink of destruction. No one can dismiss the evidence you have brought to light and the old paradigm just taken a huge blow. I’m so proud of you and always wondered whether your message of truth would ever make it to the mainstream. It has. Now all of us must come together as the grassroots and do everything possible to maximize Mike’s breakthru into the light. People are ready for change.. look at the results from last night’s elections. There could be no better spokesman than you, Mike, and I hope that music will take a back seat to the issues that have been your life’s calling. There will be time for that soon, but now we must fight for the change we all belive in. Now lets all get to work!Anyone with some sugesstions for how to start organizing the movement,pleaselet the board know what your are thinking. I hope all of you are as eager as I am to advocate Mike’s policies. Again, Mike, I’m so proud of you. You never gave up,and in the end, the whole world is going to benefit from your relentless pursuit of the truth.

    • I have a well, which is out in the open in the back yard, not city water. Even with city water services, if you’ve got water pipes that run thourgh an outside wall or unheated garage and it get’s cold enough, your pipes can freeze. If you have a raised foundation house (lots of those hereabouts) the pipes can freeze. I’d rather leave a tap running than deal with the fallout from frozen and busted pipes. Last year my neighbors on each side had their pipes freeze at different points over the winter. One’s well is placed in such a way that it gets very little sun in the winter, the other lives in a raised house. Now they both run a tap when it gets cold. The pipes froze in my step-dad’s office a couple of weeks ago because he didn’t leave the water running like mom told him to. His office is in a studio apartment that is part of the garage. My aunt lived there for a while before she died. The building is quite old, but they insulated and put in a kitchen and bath when mom and step-dad bought the house. But it is build on a rise, so part of the garage is on grade, but the rest is raised. All you have to do is leave a trickle of cold water on, just enough to keep the water moving.

    • I hope the hell they go bankrupt like the rest of us

    • I hope they go bankrupt, im getting tired of the dam rich taking advandage of the middleclass

About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.

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