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Bank of American blinks on fees

Bank of America has reversed course after suffering from a torrent of criticism and bad publicity surrounding it’s $5 debit card fees.

Bank of America has abandoned plans to begin charging debit card holders five dollars a month to use their cards, a proposal which drew intense consumer and political backlash since announced in late September.

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” said Bank of America co-COO David Darnell said in a written statement. “Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

The company’s move may bring the closing chapter to a public relations campaign from major U.S. banks that has lasted more than a year, during which financial titans insisted that last year’s Wall Street reform bill had made debit cards unprofitable for banks, forcing them to charge new monthly fees.

This was a PR nightmare for them. What took them so long?

Using prepaid credit cards

Fortune has an interesting article about the entrepreneur who created prepaid credit cards.

When the card was rolled out, kids didn’t show much interest but adults who couldn’t get checking accounts or credit bought the cards in droves, using them for such prosaic tasks as paying household bills. “I thought, ‘We have the right product, just the wrong target market,’ so we retooled,” Streit recalls.

Streit rechristened the company Green Dot (GDOT), got backing from Silicon Valley venture firm Sequoia Capital, and now is the largest provider of prepaid debit cards to the “underbanked” in America, a class estimated at 73 million people. Green Dot went public in 2010: Sequoia’s original $5.8 million stake is now worth around $270 million.

Its breakthrough came in 2005 when Wal-Mart (WMT) partnered with it for the Walmart MoneyCard, which customers load with money when they cash a paycheck or tax refund at a Wal-Mart. The retailer now accounts for 60% of Green Dot’s revenue, which hit $117 million in 2011′s first quarter, up 26% over 2010. With 4.3 million cards outstanding, it is far ahead of its closest rival, netSpend (NTSP), with 2.3 million. Wal-Mart was so impressed that it bought 9% of the company last year. Even the U.S. Treasury has started a pilot program to issue tax refunds on Green Dot cards.

It’s interesting how the card was created for students and then became popular with people who couldn’t get credit cards.

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