Banks Raise Fees To Compensate For Debit Reform

After Durbin Amendment, banks begin charging customers monthly fees.

Banks are fighting back as the Durbin Amendment is set to go into effect Oct. 1. The Federal Reserve Board in June ruled that per the Durbin Amendment debit swipe fees would be capped at 21 cents per transaction—down from 44 cents. But now banks are seeking a way to reclaim lost revenue.

Bank of America, the largest U.S. bank by assets, plans to charge customers a $5 monthly fee for making debit card purchases beginning in 2012, MarketWatch reported.

The fee will apply to customers with various checking accounts—but not to customers with specific premium accounts—during any month they use their debit card to make a purchase. The fee will not apply to customers who do not use their debit card to make a purchase or who only use it to make ATM transactions.

And Bank of America is not alone. Wells Fargo & Co. said it will charge a $3 fee for debit and ATM cards in several states starting in October if customers use the cards to make a purchase under a pilot program, and J.P. Morgan Chase & Co. has been testing a fee in a small market in Wisconsin since February. Regions Financial Corp. and SunTrust Banks Inc. have also added monthly fees for some debit-card customers.

NACS Chairman Jeff Miller, is president of Norfolk, Virginia-based Miller Oil Co noted, “A cap of 21 cents per transaction is 400% more than the four cents per transaction that the Fed-sponsored survey of banks found to be the real cost of processing a debit transaction.”

Still, Bank of America has said it expects the debit transaction caps to erase $2 billion in revenue annually. Across the banking industry, the caps, which apply to banks with $10 billion and more in assets, could wipe out $6.6 billion in annual revenue, according to an August report from Javelin Strategy and Research.

“The economics of offering a debit card have changed with recent regulations,” a spokeswoman for Bank of America said in a statement Thursday.” This new fee allows us to continue to offer the convenience of a debit card with the full range of added features customers have come to expect,” including fraud protection and monitoring, special savings programs and other services, the bank’s memo said.

 

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