Banks to Start Charging Customers to use Debit Cards

Last week Bank of America, the largest bank in the USA, said it plans to start charging a $5 monthly fee to customers who used their debit card for purchases.  This is just the first in line of some expected changes as new regulations limit banks’ profits.

Wells Fargo and Chase are testing $3 monthly debit card fees.  Sun Trust, a large regional bank, plans to start charging $5 next month and Regions Financial plans on charging $4.

This round of charges stems from the Durbin Amendment going into effect on October 1.  Banks had been charging merchants $0.44 per debit transaction, but the Durbin Amendment will limit the amount merchants can charged to a maximum of $0.24.  While this is only pennies per swipe, there are millions of debit transactions each year and the banks are expected to lose about $6.6 billion per year, starting in 2012.  That comes on top of the $5.6 billion per year banks started losing in July 2010 with a law that restricted overdraft fees.

What the banks are essentially doing is moving the cost of using a debit card from the merchant to the customer, the opposite intention of the Durbin Amendment, which was to relieve the consumer of high costs for debit transactions.  Banks aren’t just charging customers to use their debit card.  Some banks are increasing their fees if customers use an ATM for a different bank , i.e. HSBC is now charging $2.50, up from $2, if you use a non HSBC ATM.   Some banks like Citibank have made getting a free checking account more difficult.

These new bank fees are not going over well with customers.  Some people have started moving their money over to credit unions and other banking institutions.

Banks are scrambling to make up for potentially enormous losses in an already fragile industry, big government and just about every other regulator, but to be hated by their own customers may be biting off more than they can chew. I for one, will not being paying extra fees and there will be banks that will win new customers because of these fees. This is capitalism and competition at its best and may the best banks win!

http://www.nytimes.com/2011/09/30/business/banks-to-make-customers-pay-debit-card-fee.html?_r=3