Citigroup Inc., which last week touted its promise not to charge customers for using their debit cards, is countering lost interchange revenue in another way. The bank is telling some checking customers that it will start charging them $15 per month unless they maintain a balance of at least $6,000.
Citi’s decision comes on the heels of Bank of America Corp.’s announcement last week that it will start charging customers $5 per month to use their debit cards (
Citi, the third-largest U.S. bank, said last week that it would not “charge fees that discourage [debit card] use or make it unreasonably expensive to take advantage of the tools and services that consumers say are important for managing their finances,” according to a Sept. 29 email from a spokesperson.
But instead of charging for the debit card, Citi is now raising the overall price of the underlying account.
BofA customers who use their debit cards next year will pay a minimum of $13.95 per month for the most basic checking account, which is still less than what some would pay at Citi.
Stephen Troutner, Citi’s head of banking products for U.S. consumer banking, says the bank’s checking accounts will still “be extremely competitive” compared with the rest of the industry.
There are “a number of choices for customers to avoid entirely paying a service fee,” he says.
Indeed, Citi does offer less-expensive options. Troutner says the $15 monthly charge applies only to a checking account product that Citi discontinued a year ago and is trying to phase out.
Last month, Citi raised the fees on its more-basic checking account to $10 per month, from $8, unless customers maintain a $1,500 balance or regularly use it for direct deposit and online bill payments.
Many large banks have cut back on perks or have added fees to checking accounts that once were free to recoup the revenue they will lose from reduced debit card interchange rates.
Troutner would not discuss the number of customers affected by Citi’s latest pricing increase or the number of customers the bank expects to lose as a result, but he says “I’m not preparing for a lot” of customers to leave.
Citi and other large banks can offer technology and convenience that smaller institutions and credit unions cannot, he says.
“While I respect all my colleagues in community banks and the credit union industry, the reality is that’s not a great fit for every customer,” he says.
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