(Bank debit fee article updated with news on Bank of America fee withdrawal)
NEW YORK (
Bank of America
(BAC - Get Report) has dropped its proposal to charge customers a monthly fee of $5 for debit-card purchases after
furious customers threatened to take their business elsewhere
The about turn may be a
victory for Occupy Wall Street protesters
(WFC - Get Report) announced it was canceling a test program in which
it was charging debit card users $3 a month.
(JPM - Get Report)
(PNC - Get Report)
have also said they will not charge the fee.
But consumers' elation will be short lived.
That's because banks will simply move the cost to another area of the retail network, by killing free checking or adding fees to consumer loans, according to industry watchers.
Banks are seeing a potential $30 billion annual revenue loss in their payments business as new regulations restrict fee income and shrinking spreads hurt margins on checking accounts, according to consulting firm Novantas.
"The sad but honest truth is that free checking was supported by interest rates and fees. Both those options are not available to banks now," said Hank Israel, partner at Novantas.
According to Israel, the cost of providing a basic checking account is $15 to $20 per customer per month, if you factor in all costs for providing ATM and other services at branches.
Banks previously used the fees they charged merchants to pay for the costs, allowing customers to have free checking accounts.
Check Out Our Best Services for Investors
Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts