Bank of America Increases Checking Account Fees

It’s no surprise that Bank of America is now jumping into the bandwagon of major financial institutions increasing bank account fees. Wells Fargo and Chase have already added fees for existing and new customers with debit cards attached to checking accounts. Even regional banks like the SunTrust in Atlanta have already begun charging $5 fee for checking accounts as early as the beginning of summer. Financial from Birmingham, Alabama on the other hand will charge $4. Wells Fargo and Chase have already started a testing phase by collecting $3 for added fees. These banks imposed their trial payments shortly after Bank of America’s major announcement.

We do appreciate how the laws such as the Fair Credit Reporting Act have help improved charges for transaction and overdraft fees, but this had only lead the banking system in general to find alternative means to charge additional fees. The Dodd-Frank bill may have even forced banks to come up with new miscellaneous charges including annual fees. Everyone has been discussing about these during the past few days.

Banks will be collecting less than half of their revenue from card swipes. On a yearly average, financial providers earn about $19 billion a year in total from all card payments combined. They can charge around .44 cents per transaction before. But it will be reduced to .24 cents for every swipe now. As we have mentioned, this compelled banks to pass on additional fees to consumers in order to make up for the loss.

The new fees will actually vary depending on the specific state or location. The fees will not be collected all at the same time at least. The new charges will be implemented blow by blow beginning early 2012. Additional charges may range from $5 up to $12 per month with accounts below the specified maintenance balance to experience the worst. This may not matter since millions of depositors will be affected anyway knowing that the Bank of America is one of the largest U.S. banks based on total deposits. Over 38.7 million people will be affected by this change.

Regular depositors who link a debit card to their checking account to support card purchases are now thinking twice if this type of convenience is worth it. A $5 fee monthly means a total of $60 a year. Anne Rice, who is the official spokesperson for this update mentions that the $5 fee for debit cards are at least not going to be charged if no monthly purchases are made. This is unlikely to happen though. Otherwise, consumers will not even bother linking ATMs their checking accounts.

In fact, despite increasing fees for ATM made purchases, people are still purchasing with cards and not cash even if the fees have increased from $3.74 last year to $3.81 this year. Overdrafts are still abundant despite increasing rates too from $29.58 in 2009, $30.47 in 2010, and $30.83 in 2011 (this year). Thanks to written financial bills and laws, these fees are at least rising on a minimal rate.

Back in 1995, less than one percent use debit cards for purchases. Credit cards constitute the larger percentage. The number grew rapidly and rose up to 50% in 2006. About five years after (2011), over 530 million people now own debit cards with 2 out 3 card based payment transactions completed through debit cards over credit cards.

As for checking accounts, services with no associated fees whatsoever are still available at least from smaller banks. Although the overall number of these banks and non-earning checking accounts have declined from 76 percent in 2009, down to 65 percent last year, and now at only 45 percent. The statistics are based from Bankrate.com. The same institution mentions that only 2 percent of checking accounts actually charge for debit card transactions. This was prior to Bank of America’s new rule on fees of course.

With everything discussed here, individuals who take advantage of conveniently paying through debit cards are certainly going to think twice once the fees are collected next year.