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Debit Card Fees Still Biting Banks

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Bank of America and others abandoned debit card fees, but the proposed charges continue to rankle customers, according to a new survey. Nearly one-in-three adults say they would leave their bank if it introduced similar fees or any other overnight charges, according to a survey by market research consulting firm The Research Intelligence Group or TRiG. (The American Bankers Association and BofA declined to comment on the report.)

Roughly three quarters of those polled believe banks abandoned the debit card fee because they feared a backlash by consumers and, most specifically, a fear of customers leaving their bank (55%), the survey says.

And the flap over fees isn’t going away, as evidenced by the lawsuit the National Retail Federation and other trade groups filed Tuesday against the Federal Reserve arguing that the government agency went too easy on banks when it set limits on the debit-card fees banks charge retailers. The American Bankers Association has repeatedly said that they are losing vast amounts of money because of that deal, which halved the transaction fees collected on every purchase.

Nor do those polled trust their bank more because consumers won the battle over debit card fees. Only 7% believe the primary reason for this change of heart had anything to do with increased value placed on customers, the survey says. Financial institutions need to continue to find ways to embrace customer needs and enhance communication to maintain and build positive consumer opinion and loyalty,” says Bruce Shandler, CEO of TRiG.

As Pay Dirt reported, experts say banks will likely search for other ways to make up the 50% reduction in interchange fees merchants pay on debit card purchases. But, according to the survey, banks should tread carefully before trying out another fee. Customers are on high alert to any future fees banks may introduce, it says. Nearly all of those polled by TriG (91%) say they were aware some banks planned to introduce a fee for debit card purchases.

However, banks are already finding ways to make up the difference on debit card interchange 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. As we’ve previously reported, banks are phasing out debit card reward programs. Plus, debit cards offer far fewer protections than credit cards if they are lost or stolen.

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  • 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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