Nov
01After weeks of negative feed-back and customer frustration, Bank of America has given up trying to introduce a new policy to charge customers for using their debit card.
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Although Bank of America was not the only bank to announce that they would be charging fees, they were the most prominent in the media. Most of the other major U.S. financial institutions have also thrown in the towel trying to introduce new fees.
The recent turmoil has created a big boost the credit card industry but despite the banks’ retreat, most analysts are expecting consumers to continue to reach for their credit card when they want to pay with plastic.
According to Equifax, credit card usage has been on the rise since 2010 and that trend continues through 2011. The increasing trend can also be seen in earnings of major credit card companies.
On Nov. 3 MasterCard reported a 38% increase in profits for the third-quarter. The company also reported a 21% increase in the number of transactions it has processed in the last three months.
MasterCard is not the only company to see increased profits. On Oct. 26, Visa reported that their fourth-quarter profits increase 14% from the previous year. Analysts pointed out that the higher earnings were down from the third-quarter but its revenue remains stable. The company credited the year-over-year increase is due to higher transactions.
Earlier in the month, on Oct. 16, American Express reported a 13% jump in earnings in the third-quarter. The company reported that consumer spending increased by 16%.
“The credit card industry is becoming extremely competitive. Consumers can find cards that give them rewards points, travel points and even cash,” he said. “There are a lot of great deals that people take advantage of.”
The credit card industry is very much unlike bank debit cards. Previously, banks were offering great promotional deals for clients who use debit cards but now because of government regulations, the banks are unable to make the same kind of profits and as a result have been cutting back their debit card promotions.
“Credit card companies are using all types of reward programs and bonus incentives to attract new customers,” said Tran. “Now is the time to take advantage of these programs.”
Along with Bank of America, Wells Fargo and Chase were two other major financial institutions that considering creating debit card fees. Of all the major banks, only Citigroup had stated that they would not impose new fees on their clients.
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