NEW YORK ( TheStreet) -- Bank of America ( BAC) announced on Thursday that it will start charging a monthly fee of $5 to customers who use debit cards to make purchases in any given month. The fee won't apply to those who use the card to make ATM withdrawals. Customers can also continue to use their online checking account for bill payments and transfers without attracting a fee. The fee will also not be applied to premium banking customers, who typically maintain higher minimum balances at the bank.
The bank said it was levying the fee because the "economics of offering a debit card have changed with recent regulations." A provision in Dodd Frank called the Durbin Amendment limits the fees banks can charge merchants for debit card transactions to 24 cents. Bank of America had said earlier that the regulation would cost it $2 billion in revenues annually. Other banks have made similar arguments and had warned that they would end up passing costs to the customer. Bank of America is not the first to charge this fee. Other banks have also tried to find new ways to offset the revenue loss. Wells Fargo ( WFC) is testing a monthly fee of $3 in select markets for debit card purchases. JPMorgan Chase ( JPM) is test marketing a fee as well. Citigroup ( C) said it will raise the monthly fees to $10 for basic checking and savings account, but won't charge customers who maintain a certain minimum balance. Customers who use direct deposit and pay bills online at least once a month can also escape the fee. Still, the idea that Bank of America would charge customers as much as $60 a year for using debit cards to buy groceries at Wal-Mart ( WMT) had some of TheStreet's readers hopping mad. "I've been a customer of BAC since it was C&S, way back in 1991. I think my loyalty has finally run out," one reader wrote. "Moving to Wells Fargo and JPM," said another. Others were just plain mad at Bank of America for all its past mistakes. "They took billions of dollars from government. That money is also tax payers money. So, now they want to charge us for using our own money?" asked Harold Cho.
Bank of America says the $5 fee is just the cost of offering the service. "This new fee allows us to continue to offer the convenience of a debit card with the full range of added features customers have come to expect - fraud protection ($0 Liability), overdraft prevention, record-keeping, fraud monitoring, and savings programs (Keep the Change and Add-It-Up)," a spokesperson said in a statement. The bank probably figures that at worst customers will simply stop using debit cards and use cash instead. Better yet, it would be great if customers start switching to credit cards which are more profitable for banks. But they probably aren't counting on customers actually leaving the bank and taking their business elsewhere. After all, when the nation's largest bank charges a fee, won't all the others follow suit? Readers, is the $5 monthly fee the last straw? Will you leave Bank of America? Take our poll to find what readers of TheStreet think.
--Written by Shanthi Bharatwaj in New York >To contact the writer of this article, click here: Shanthi Bharatwaj. >To follow the writer on Twitter, go to http://twitter.com/shavenk. Readers Also Like: >> Bank of America Dumps Customers Over $5? -- Today's Outrage >> 10 Bank Stocks Turning the Earnings Corner