Go ahead, put that cash back in your wallet: For many bank customers, swiping debit cards is once again free.
Bank of America announced this week that it no longer plans to charge customers $5 a month for making purchases with their debit cards, a controversial move the company made just last month.
We know a lot of you were angry at the new fee, but, as we noted in our story on why corporations do what they do, the bank's decision was motivated by their bottom line.
The very same place they became vulnerable.
What—and Who—Made Them Change Course
David Darnell, Bank of America’s co-chief operating officer, cited consumer feedback as the bank's reason for backing down. “Our customer’s voices are most important to us,” he said in a statement. “As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”
The lesson for consumers? One of the best ways to make a company listen is to hit it where it hurts—its stock price. In this case, one of the clearest ways to send a message was to simply switch to another bank. That would cause any bank levying fees to lose customers and their deposits, lowering overall profits.
Of course, Bank of America already knew it would upset customers with the new fee, so we have to surmise that the company decided to backtrack because the outcry was bigger, and the potential profit losses greater, than originally estimated. We chalk it up to social media, which has turned public outcry into an art. Some customers even declared this Saturday, November 5, “Bank Transfer Day," pledging to remove their deposits from big banks in reaction to the fees. Only the policy changed before the withdrawals began.
It's Not Just Bank of America
The announcement followed several other banks’ decisions to drop their debit card charges. Wells Fargo and J.P. Morgan Chase said that they would cancel their plans for $3 monthly debit card usage fees, and SunTrust announced it would not only drop its $5 charge but would also refund customers who had incurred it.
Banks originally implemented the fees to help make up for the billions of dollars in revenue they were losing. In addition to the down economy, banks have been hit by new federal regulations that halved the amount they could charge merchants for accepting debit cards. Banks have added and raised fees on many services, but this incredibly negative backlash was reserved for the debit card charge.
President Obama and Senator Richard Durbin, who wrote the provision that reduced merchant debit card fees, spoke out against the new charges, and consumer advocates also criticized the banks that implemented the fees.
Love or Hate Your Bank?
Tell us your experience in the new LV Discussions!Share Away
What This Means for the Economy
The only group that would really profit from Bank of America's $5 fee would be its shareholders. B of A's share price was down at the beginning of the week, and critics are waiting to see what will happen next.
Other Financial News to Know:
In the meantime, Monday started out with a serious dip in the stock market as a result of Greece's demand for a public referendum (more on that here), and financial stocks were especially affected by all the European troubles. But, by Wednesday, the financial sector was starting to rebound.
For all the latest economic news that matters to your bottom line, sign up for The Market, LearnVest's new weekly newsletter.
Image credit: MoneyBlogNewz / Flickr