Is New BofA Plan Worse than $5 Debit Fee? — The West Ranch Beacon

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From smartmoney.com) Populist anger pushed Bank of America to abandon its proposed $5 debit-card fee last year. But for some customers, experts say new fees the bank plans to introduce in its place may be even worse. America’s second-largest bank may roll out higher monthly charges on customers who fail to maintain a certain balance, buy other products, or bank strictly online, the Wall Street Journal reports. Accounts currently being tested in Arizona, Georgia and Massachusetts carry monthly fees ranging from $6 to $25 a month — well over the debit-card fee. (Bank of America and the American Bankers Association did not respond to requests for comment.)

These higher monthly checking fees would be charged to customers who can least afford the higher rates, experts say. But the bank will spare its most valuable customers, says Odysseas Papadimitriou, chief executive of CardHub.com. “If they execute this correctly they will only alienate their most unprofitable customers,” he says.

As a result, this could be even worse than the debit card fee debacle, some contend. With the earlier $5 fee, customers could still choose to abandon their debit cards, but giving up a checking account really isn’t an option. Ironically, free checking accounts had been subsidized in part by the transaction fees charged to merchants each time a debit card was used, says Ben Woolsey, spokesman for CreditCards.com. Now that those transaction fees have been reduced, the subsidy is going in reverse: customer checking fees are being used to cover the cost of debit cards, he says.