By Hao Li: Subscribe to Hao's RSS feed
October 1, 2011 12:32 PM EDT
Bank of America will start charging $5 on a monthly basis for customers who use its debit cards.
This isn't an arbitrary decision. A new government regulation will cap fees banks can charge merchants for debit card transactions. To recoup lost revenues, Bank of America and several other banks are passing the fees onto customers.
Bank of America will only charge the fee to lower-tiered accounts. The rule will not apply to ATM cash withdrawals and will take effect sometime in early 2012.
According to an analysis from Consumer Affairs, $5 monthly fee seems to be a reasonable estimate of how much banks would lose per customers from the new debit card regulation.
Still, despite having a justification for increasing the price, customers are seething and threatening to leave the bank (or have already done so).
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"It's illegal to rob a Bank of America, but legal for Bank of America to rob you of five dollars every month for spending your own money," complained one user on Twitter.
"Bank of America is like a man who's been saved from a burning building and then kicks the fireman in the nuts," wrote another, referencing the multibillion dollar bailout Bank of America received from U.S. taxpayers during the 2008 to 2009 financial crisis.
Whether or not it's fair to compare the bank's $5 debit card fee to the bailout money it received during a financial crisis is irrelevant.
What Bank of America doesn't get is that the customers don't care about its internal business considerations; they only care about its services. Right now, charging $5 to customers for spending their own money just sounds wrong.
This is the same mistake Netflix made. Netflix decided to separate its streaming and DVD by mail business -- and raised the combined cost of the two services -- because it made sense to do so based on internal business considerations.
When it communicated the change to customers, it focused on why the move made sense in that regard.
The customers, however, didn't care about any of that. Many lashed out at Netflix and canceled their subscriptions.
"You're not a DVD company and a streaming company: you're where I go to watch movies. That's it," complained one frustrated Netflix customer.
The lesson to Netflix and Bank of America is this: Customers only care about services but not one bit about the company's internal business considerations.
When circumstances change in business considerations, companies shouldn't just be lazy and roll out a solution that's neat for itself but unpalatable for customers.
The lazy thing for Bank of America to do is to simply pass on the cost to customers. The savvier thing to do would have been making up for the cost from other places, charging debit card usage more indirectly, and finding ways to incentivize customers to use credit cards instead.
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