As new banking regulations were rolled out in the wake of the financial meltdown, there have been a variety of consequences on both banks and consumers. Specifically, I’m referring to the Durbin amendment to the Frank-Dodd Act, which places limits on the fees a bank can charge to businesses who handle card-based transactions. In response to losing that revenue, last month Bank of America announced that it would begin charging customers $5 per month to use their BofA debit card for purchases.
Unless you’ve been out of the country over the past month, you’ve heard coverage about the consumer backlash to this move. But the question I have is, “Will other banks follow?” Two recent stories have offered clarity on this issue. One was published in today’s Marketing Daily (click here to see it). And the other—even better—is an article and video conversation on the matter from MSN Money (click the image below or this text to be taken to that version).
Implications: Perhaps the better question is: “Can the banking industry re-train consumers who’ve been getting this service for free to now pay a fee for the convenience of using plastic?” We’re used to having things work the other way around! For example, long-distance phone calls used to be really expensive… but in the wireless age (as part of one's monthly contract), "free" has become the new expectation.
The MSN story is wise to point out that $5 is cheap for the convenience of using a debit card for purchases… unless numerous other sources are offering that service for free. It will be interesting to see how other banks respond. (No doubt, they are studying the BofA fallout closely, to see when/whether it subsides.)
Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.
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