Bank of America Should Have Kept Debit Card Fee

Bank of America's decision not to implement its controversial and much-maligned $5-per-month fee for debit card usage seems to be a victory for consumer outrage. But it wasn't a victory for good business practices, nor for true free market capitalism.

I believe Bank of America should have gone ahead with the fee, unapologetically. We've already seen BofA's stock price plunge 6 percent after the news came out. And while no one is shedding any tears for bank executives, the rank-and-file BofA employees are feeling the pain of the bank's economic woes through job cuts.

It's very easy to use cute phrases (banksters, anyone?) and spout slogans angrily in the general direction of large banks. But just because people are angry and loud doesn't mean they have a full grasp of the issues. The bank initially imposed the fee as a direct result of the Durbin Amendment of the Dodd-Frank financial reform bill, which caps the amount banks can charge retailers for debit cards purchases. The cap limits the fee to an average of 24 cents per transaction instead of the previous industry average of 44 cents. BofA estimated it would lose about $2 billion per year due to this provision, and the fee was a way to offset those losses. That's not an insignificant amount of money, and coupled with a slumping stock price means this about-face may not have been the best business decision for the bank.

You might say Bank of America doesn't have an inherent right to make a certain amount of profit. If that's your opinion, then fine. But that brings me to my other point.

If Bank of America, or any other financial institution, institutes a fee that you, its customer, doesn't like, you don't have to pay it. How? Simply move your business to another bank. Despite what the Occupy Wall Street people say, we don't live in a police state and are free to do business with whomever we wish. There are thousands of community banks and credit unions in the country, and most of them don't charge debit card fees. In fact, some small banks used the backlash against Bank of America for marketing purposes to great effect. And I applaud that. That's how things should work in a free market.

Ultimately, Bank of America made a bad business decision by changing course on this matter. Sometimes good leadership means making the difficult decisions amidst negative public outcry. Just as the bank has the right to run its business as it sees fit, its customers have an equal right to leave and not do business with them anymore.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio