SunTrust Banks sounded a full retreat on debit card fees on Monday, joining other major banks that have reacted to withering criticism.
SunTrust, Wells Fargo and Bank of America, the top three banks in metro Atlanta by deposits, all have indicated they will drop or tinker with their plans for charging fees to customers who use debit cards for purchases.
Atlanta-based SunTrust, which started levying a $5 monthly fee in June, said it listened to customers’ feedback and will no longer charge the monthly fee starting Wednesday. All clients that were charged a fee prior to then will receive a refund, SunTrust spokesman Mike McCoy said, calling it “the right thing to do.”
Regions Bank, No. 6 in metro Atlanta, also announced Monday its plan to drop its $4 monthly debit fee and give customers a refund.
The backtracking by the big banks follows harsh rebukes from consumers, some members of Congress and even President Barack Obama after Bank of America in September announced its plan to charge customers to make purchases with their debit cards.
Many consumer groups were enraged that banks that received taxpayer-funded bailouts during the financial crisis were charging clients to access cash in their own accounts.
Keidra Dobbs, a SunTrust customer from Duluth, said she’s “ecstatic” her bank dropped the fee. The 26-year-old and her husband were planning to move their business to a credit union.
“I am worried, however, that they will find a way to make this up,” said Dobbs, who plans to stick with the only bank she’s ever known.
Customers of many banks can probably count on it.
Greg McBride, senior financial analyst for Bankrate.com, said consumers should watch for an “upward creep” in other fees such as ATM usage or monthly account maintenance. And banks might put up new hurdles to keep checking free, he said.
The banking industry is still struggling to move past the mortgage debacle and implosion of the real estate market, and lenders aren’t earning as much from interest charged on loans as they used to.
New regulations on overdraft fees and credit cards also cut into bank revenue.
In October, the Durbin Amendment, part of the broader Dodd-Frank regulatory overhaul, took effect, capping “interchange fees,” or what banks over $10 billion in assets could charge merchants when consumers swiped a debit card.
Many banks reacted with new hurdles to free checking. Then came the debit fees.
SunTrust has said more recent regulatory changes on such things as overdraft and debit transaction fees amount to a $300 million hit to annual revenue. Bloomberg has reported the interchange fee cap could cost the largest banks $8 billion in revenue a year.
The banks argue providing bank accounts, bank branches, automated teller machines, online banking and protection of clients' identities isn’t cheap.
Earlier this year, SunTrust, the No. 1 bank in metro Atlanta, and many other large banks made it harder for consumers to keep checking free. At SunTrust, for instance, customers with the most basic account must keep a minimum balance of $500 or have direct deposit to keep checking free.
Many community banks and credit unions that haven’t enacted fees pounced, trying to win over consumers angered by the charges. Also, there is a national grass-roots movement calling Nov. 5 Bank Transfer Day, to encourage customers of major banks to switch to credit unions.
Wells Fargo, No. 2 in the metro area, backed away from a monthly debit fee last week. It tested a $3 monthly fee in Georgia and other markets.
Chase, which tested a fee in Georgia and parts of Wisconsin, and other major U.S. banks also indicated they would not pursue the fees.
Bank of America, the No. 3 bank in metro Atlanta, indicated the bank was considering ways to narrow the number of customers to be hit by its $5 monthly debit fee, according to media reports. The fee is scheduled to start in January.
In March, Bankrate.com found that 64 percent of customers would rather switch banks than pay higher fees. The figure for the wealthiest bank clients was even higher.
“Banks wouldn’t be backpedaling if it were only the unprofitable customers that were leaving," McBride said.
Terry McEvoy, bank analyst with Oppenheimer & Co. in New York, said banks will likely not risk the consumer backlash of announcing any new fees in the meantime.
Instead, he said, major banks will stress to consumers the value of banking services and "cross sell" more products -- car loans, credit cards, investments and mortgages -- for “a broader share of the customer’s wallet.”
While it's costly for banks at a time when they're looking to trim expenses, "cross selling" could bring big gains in revenue over time.
“Step one of deepening that relationship is knowing what the customer wants. They don’t want debit fees,” he said.
