Did BofA (BAC) Just Put the Nail in the Coffin With a Rumored $5 Debit Card Purchase Fee?
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Price: $13.31 -0.97%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 0.3%
Revenue Growth %: +5.4%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 0.3%
Revenue Growth %: +5.4%
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Reports from the WSJ Thursday rumor Bank of America (NYSE: BAC) is aiming to charge $5 per month for debit card purchase transactions.
The move, expected to begin early in 2012, will apply to those who buy items with their debit card -- not on premium accounts or for ATM withdrawals.
With $2 billion in annual revenue expected to be lost starting October 1st due to new caps on fees, BofA is taking measures to repatriate some of the loss it expects to incur.
But this could spell nothing but disaster. For perspective, let's take a look at what happened when Netflix (Nasdaq: NFLX) decided to charge just $6 per month more to customers.
In July, Netflix announced it was scrapping the $9.99 per month unlimited DVD-and-streaming plan in favor of two separate plans, each costing $7.99 per month. Netflix stock plummeted from $291.27 on July 12th to around $112.55 Thursday afternoon, a 61 percent drop. The move erased some $10 billion in market cap.
All for a measly $6 per month. Less than the price of one cup of Starbucks (Nasdaq: SBUX).
The major difference here (besides one being a large bank and the other being a streaming-service provider) is BofA shares are already near lows -- have been, in fact. The stock is off about 55.5 percent from the start of 2011.
BofA shares are last traded at $6.23, up 1.1 percent from Wednesday's closing price.
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The move, expected to begin early in 2012, will apply to those who buy items with their debit card -- not on premium accounts or for ATM withdrawals.
With $2 billion in annual revenue expected to be lost starting October 1st due to new caps on fees, BofA is taking measures to repatriate some of the loss it expects to incur.
But this could spell nothing but disaster. For perspective, let's take a look at what happened when Netflix (Nasdaq: NFLX) decided to charge just $6 per month more to customers.
In July, Netflix announced it was scrapping the $9.99 per month unlimited DVD-and-streaming plan in favor of two separate plans, each costing $7.99 per month. Netflix stock plummeted from $291.27 on July 12th to around $112.55 Thursday afternoon, a 61 percent drop. The move erased some $10 billion in market cap.
All for a measly $6 per month. Less than the price of one cup of Starbucks (Nasdaq: SBUX).
The major difference here (besides one being a large bank and the other being a streaming-service provider) is BofA shares are already near lows -- have been, in fact. The stock is off about 55.5 percent from the start of 2011.
BofA shares are last traded at $6.23, up 1.1 percent from Wednesday's closing price.
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Bank of America Debit Card Fee Hike
Greg on Oct 3, 2011 04:23 PMMark as Spam | Reply to this comment
Well, of course BofA and all other banks will find ways to make up for their lost revenues. Did anyone really expect them to cheerfully write off their losses and move on? Whoever did expect that probably also believed that retailers will be passing their savings on to their customers. Ever since the Fed cut the debit interchange fees it was obvious to anyone who was paying attention that consumers will end up footing the bill. http://blog.unibulmerchantservices.com/debit-card-fee-limit-lifted-to-24-cents-consumers-will-still-pay-for-it