Debit Card Issuers Introducing New Fees

Recently, Wells Fargo announced that as of October 14, 2011, they will begin to test a $3 monthly charge for checking account customers that use their debit card. This fee is in addition to other monthly checking account fees. Customers that don’t use their debit card won’t have to pay the monthly fee. The pilot will be conducted in five states – Georgia, Nevada, New Mexico, Oregon and Washington. Their decision was based upon the Durbin Amendment of the Dodd-Frank Act which lowered the debit card transaction fee merchants pay banks from $.44 to $.21.  The Durbin Amendment will become effective on October 1, 2011.

Wells isn’t alone; Chase began testing a $3 monthly debit card fee in Wisconsin in February 2011, SunTrust charges $5 a month and Regions Bank $4 a month. Bank of America is evaluating this and hasn’t made a decision.  I have (or had) a SunTrust check card, closed it, and replaced it with a USAA Bank debit card, which has no fee.

Some banks have taken other steps to increase revenue such as eliminating debit card rewards, eliminating free checking, or limiting the number of debit card transactions.  Banks are trying to make up for the revenue they will lose when the Durbin Amendment becomes law, which will cut their debit card transaction revenue in half.  According to the Nilson Report, bank revenue from debit card swipe fees charged to merchants was estimated to be $19.7 billion in 2009 and $1.39 trillion was spent using debit cards in the U.S. in 2010.  These numbers are not to be taken lightly.

It will be interesting to see how these banks’ customers react to the fees. Will Gen Y view it as equivalent to getting a cup of coffee at Starbucks for one day, several iTunes downloads a month, or a movie rental? Will a majority of customers really stop using debit cards as indicated in an Associated Press-GFK poll? On the other side, it will be interesting to note the reaction of other banks – will they follow suit?

You have options such as stop using your debit card, use cash for purchases, use credit cards, or switch banks.  It may be a time to shop around for another bank or credit union.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Financial, Government, Money & Identity

This post was written by John Ulzheimer