(Bank debit fee article updated with news on Bank of America fee withdrawal)
NEW YORK ( TheStreet) - Bank of America ( BAC) 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 . On Friday, Wells Fargo ( WFC) announced it was canceling a test program in which it was charging debit card users $3 a month. JPMorgan Chase ( JPM), Citigroup ( C) and PNC Financial ( PNC) 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.