Bank of America is a deeply troubled bank and it is taking its problems out on the poor. The $5 a month fee on debit cards is an all too obvious clue. Bank of America's problem is it takes its customers for granted, assuming they will always be there. What Bank of America customers need to do now (and what Citibank customers and those who use banks implementing the same ill-judged charges need to do) is withdraw their money and close their accounts, taking their business elsewhere. This will shut these ill-willed corporations down for good and show future banks and corporations that Americans will not tolerate this kind of abuse. Banks used to get this money in other ways, by placing fees on transactions, until Congress made a law reducing these charges (the Durban amendment of the Dodd-Frank Act pushing down what banks can charge merchants for transactions from 44c to 24c). Now they are punishing the public for past abusive practices the government has stopped them from doing.
Bank of America has been calling its customers and telling them they will begin charging $15 a month for having a checking account with them, when the customers refuse saying they will take their money elsewhere, Bank of America says OK, we'll only charge you $9 a month. On a second refusal they agree to keep the charge at $0. Shortly after this embarrassment, the bank decided to roll out the ATM fee. What is the CEO of Bank of America thinking? What are any of the heads of the company thinking coming up with this approach? Clearly, they're not.
Forbes said this:
As we wrote in a previous piece, back in the mid of the subprime crisis, Bank of America (NYSE:BAC) committed two strategic mistakes that end up costing the bank dearly: the purchase of Countrywide Financial and the purchase of Merrill Lynch.
Last week, the bank committed a third strategic mistake, announcing a $5 monthly fee for its debit cardholders. While this fee is a way for the bank to offset the loss of revenues caused by the Durbin Amendment of Dodd-Frank Act (a reduction in the fee banks can charge merchants from 44 cents to 24 cents per transaction), it may end up hurting the bank in the long run.
Rushing to improve its top line, BAC’s leadership commits a common mistake large corporations make: taking the customer for granted, holding the belief that whatever products or services they offer are unique and indispensible, so their customers will always be there.
While this theory applied in the old days when corporations were the center of the economic universe and customers had limited options, it doesn’t apply in today’s markets where customers have a variety of options. For example, McDonald’s (NYSE:MCD), Research in Motion (NASDAQ:RIMM), Cisco Systems (NASDAQ:CSCO), Hewlett-Packard (NYSE:HPQ), and Netflix (NASDAQ:NFLX) that have made such a mistake in the past suffered the consequences; their top and bottom lines contracted, as consumers fled to competitors; and their stock headed south.
We do believe that the same fate awaits Bank of America, as its customers have a variety of options: First, they can appeal to US Congress to repeal the fee, as the Dodd-Frank regulation wasn’t intended to sting debit card holders with this fee, but to make banks and merchants efficient.
Second, they can cut the card and send it back to Bank of America, moving their money elsewhere. Third, with interest rates so low, they can stay away form banks altogether. Forth, they can switch into alternatives—special purpose—debit cards like the ones issued by non-banking institutions.
The bottom line: The debit card fee may boost Bank of America’s top line in the short-run, but it may cost dearly in the long-run, as customers will flee to competitors or cut their debit cards altogether.
Citibank started charing $15 a month for people with accounts under $6000. This is a huge punishment to the people who make them what they are. Naturally, everyone with accounts at Citibank need to leave it for the good of the country. With interest rates as low as they currently are people are better off sticking the money in their mattresses.
Perhaps it would be wisest for Americans to make their reliance on Wall Street a thing of the past, for them to get out of the large corporate banking systems they belong to and end this corporate raiding of the little guy (and gal) once and forever. How do you convince the people? Simply by making them aware of it. And bloggers like myself don't have to worry about spreading awareness; the fact that Bank of America is doing something as stupid as a $5 ATM card charge will spread the news quickly enough. We are in a rapidly changing world and those in the top 1% of wealth will not be their for long. They know they need the support of the masses, but appear not to realize how quickly knowledge of their increasingly deceptive ways is spreading like wildfire (the reason the Wall Street protests across the country are stifled by mainstream media? Obviously).
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