With debit card fees on the rise, it looks like checking accounts and banking relationships are going to start getting a little more attention from consumers.
After all, if there's one thing Americans hate, it's being charged for something that used to be free. Sure, we don't mind buying something "premium" that used to be free (see bottled water and oxygen bars), but send us a bill for something we're used to enjoying for free (toll roads and parking), and watch the sparks fly.
That's why it's interesting to see the proliferation of debit card fees in the banking industry right now. So far, First Tennessee (4 cents to 14 cents a transaction, up to $3), SunTrust ($5 per month) and Regions Bank ($4 per month) to name a few big ones, have announced plans to charge, or are already charging, customers for debit card use on some of their accounts. Wells Fargo and Chase are testing their own debit card fees.
So far, the fees seem to be taking one of two forms: a blanket per-month fee for using a debit card, or a point-of-sale fee for each transaction.
If you're wondering what gives and you don't make a habit of reading about the banking industry, banks are looking to recapture some of the revenue lost to two major regulatory changes in the last two years: the Fed's "opt-in" rule for overdraft, and Dodd-Frank-mandated limits on the swipe fees banks charge merchants to process debit transactions.
The latter change takes effect Oct. 1, so expect to see more debit card fees coming down the pike this fall. Keep an eye on the mail for correspondence from your bank; by law, they have to send you a new fee schedule when they make those types of changes.
I have mixed feelings about these fees. On the one hand, a checking account is a service that has value; it allows you to have your cash in a secure location and access it in seconds via a card at millions of locations worldwide. It doesn't cost a lot for banks to provide that service because of the automation and economy of scale they've created, but it's not nothing. A lot of banks' checking income is now constrained by regulations that seek to unburden consumers of exorbitant overdraft fees and inflated retail prices, respectively, and they have to find ways to both pay for those checking account operating costs and avoid a big hit to their profits that would annoy their shareholders.
On the other hand, as a consumer, I probably wouldn't stomach a debit-card fee, even if it's just a few bucks a month. Just as I know congestion pricing on parking is intellectually a great idea to help alleviate parking shortages in urban areas, but still hate paying a lot for parking, I can understand why banks need to seek alternative revenue sources but hate the idea of paying debit card fees.
If you're like me, and the level of fees on your accounts is important to you, then I'd urge you to start thinking about the value proposition you're getting from your bank if you hear your bank is instituting a debit card fee.
For me, even though I like my big banks' omnipresent ATMs and global reach, I'd have to say it wouldn't be. In my view, there will always be somebody in the marketplace offering free checking with a debit card, and should my bank decide to charge me for debit transactions, that's where my money will end up.
What do you think? Is your current checking account worth paying a debit card fee for? Or would you go somewhere else to avoid paying for debit?