UPDATE: US Banks Begin Charging Monthly Debit-Card Fees
August 17 2011 - 5:55PM
Dow Jones News
Wells Fargo & Co. (WFC) is joining a growing number of banks
that are introducing or testing a monthly fee for debit cards,
casting around for revenue lost to debit-card regulatory
restrictions.
Wells Fargo, the nation's second-largest bank by deposits, will
charge a $3 fee for debit and automated-teller-machine cards as of
Oct. 14 in several states if such cards are used for purchases (but
not for ATM usage). The bank said it is a pilot program, and it
will monitor how people respond.
J.P. Morgan Chase & Co. (JPM) has been testing a fee in a
small market in Wisconsin since February. Other banks, such as
Regions Financial Corp. (RF) and SunTrust Banks Inc. (STI), decided
recently that debit cards for some of their checking-account
customers will carry a $4 and $5 monthly fee, respectively. Like
Wells Fargo, Regions said it will charge the fee only if the card
is used for purchases.
TCF Financial Corp. (TCB) is mulling monthly debit-card fees for
customers as well as charging customers who use their cards more
than a certain number of times, a spokesman said. "Every bank
around I think will ultimately end up with some type of fee," he
said. "We are in the decision phase."
Laurie Readhead, a retail banking executive at Bank of America
Corp. (BAC), told investors in May that "Pricing for debit cards,
that's something that we're talking about potentially testing." A
spokeswoman for the nation's largest bank by assets and deposits
said Wednesday it wasn't testing a debit fee at this time, "but we
are evaluating pricing across all our payments products."
Already, Wells Fargo and other banks have stripped debit cards
of reward points because bankers said they will lose hundreds of
millions in revenue after the Federal Reserve decided to lower the
fee that banks can charge merchants for debit-card
transactions.
The Fed's action was required by the Durbin amendment to the
Dodd-Frank law that overhauled regulation for the
financial-services industry after the mortgage meltdown. Banks were
furious about the new restrictions.
Several banks, including Wells Fargo, had warned they were
looking for ways to offset lost revenue. TCF, a large debit-card
issuer, had taken the Federal Reserve to court over the Durbin
amendment. One bank was mulling calling a new fee the "Durbin fee"
on account statements, according to a person familiar with the
matter.
Wells Fargo is introducing the new fee in a milder manner: A
simple "important fee change information" letter was emailed to
customers, or mailed as an insert with the monthly statements.
A spokeswoman wouldn't say how long Wells Fargo is planning to
run the pilot in Washington, Georgia, New Mexico, Nevada, and
Oregon. Wells Fargo will be watching customer response. "That's why
it's a test," she said. "Some people understand why we do this but
others don't like fees regardless" of the reason.
Some banks are holding out--or even staying away from the fee.
U.S. Bancorp (USB) and Capital One Financial Corp. (COF) have no
plans to charge fees, representatives said. Capital One even kept
its debit-card rewards program. PNC Financial Services Group Inc.
(PNC) stripped rewards from those customers who chose a free
checking account.
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com
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