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Banks' debit fee flip-flop is no reason for consumers to relax

In this populist moment when protesters "occupy" Wall Street and big banks backtrack on proposed fees, celebrate Bank of America's decision to kill its planned $5 monthly debit card charge.

The idea to add the fee was "up there with New Coke" in the annals of bad marketing decisions, says Greg McBride, Bankrate.com's consumer banking guru, referencing Coca-Cola's major reformulation stumble in 1985. This even tops the recent uproar over bank overdraft fees.

Just don't let banking's brief retreat go to your head.

McBride and other bank experts say that consumers already are scrimping in this battered economy. Many are ready to dump any financial institution that gets too big for its britches and tries to shove new fees down their throats.

Bank of America learned that the hard way. On Tuesday, after being publicly shredded for weeks, the North Carolina giant announced it will end its proposed $5 fee, saying "we have listened to our customers" because their "voices are most important to us."

What? You doubt such sincerity?

Like many of you, I have banked — sometimes willingly but more often by default via mergers — with many of the big banks in this country. Bank of America, Citibank, JPMorgan Chase, Wells Fargo? Yep, done 'em all. I've also banked with many former behemoths swallowed up in our Darwinian banking landscape, from First Union and Wachovia to Chemical Bank to Manufacturers Hanover Trust.

What did they have in common? None hesitated to add new banking fees.

Be assured the same big banks that caved on debit card fees are busy crafting new ways to make a profit off You the Customer. Customers who remain unprofitable can expect institutions to use fees to persuade them to bank elsewhere.

"Consumers are not out of the woods on the fees," McBride warned in an interview Wednesday. "There are other levers banks can pull to recoup revenue."

Remember, banks came up with a debit card fee after lawmakers put a cap on how much banks charge retailers every time customers swiped their debit cards at stores.

That cap benefited retailers but cost banks money. So banks devised debit card fees, in effect charging their own customers for money they no longer got from retail stores.

Now it's back to the drawing board for banks to conjure new ways to extract cash from consumers.

Like airlines — an industry competing with banks as Masters of Nickel and Diming — banks are quick to follow one another with new fees.

"What is the wisdom of charging people checked bag fees? They just bring bigger bags on the plane, the bins fill up and the plane gets delayed sorting it all out," McBride says. "Anybody traveling regularly could see that coming miles away."

McBride predicts banks now will trim debit card reward programs that give cash rebates or points to customers. And banks will increase the minimum balance customers must maintain in checking accounts to avoid a monthly fee.

Shop around, he advises, especially at community banks, credit unions or online banks.

McBride swears he pays no bank fees. Savvy customers can do the same.

Robert Trigaux can be reached at trigaux@sptimes.com.

Banks' debit fee flip-flop is no reason for consumers to relax

11/02/11 [Last modified: Monday, November 7, 2011 5:51pm]
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