NEW YORK (MainStreet) — Ding dong, the debit card fee is (mostly) dead.
Wells Fargo (Stock Quote: WFC) announced Friday that it will abandon a pilot program that tested charging account holders $3 per month for debit card use, following Chase’s (Stock Quote: JPM) announcement that it would scrap a similar fee.
Even Bank of America (Stock Quote: BAC), which sparked consumer outrage and a nationwide movement to abandon the big banks when it announced a $5 debit card fee for all customers in 2013, has apparently changed its mind. An unnamed source told the Associated Press on Friday that the bank will likely offer ways for its customers to avoid the debit card fee through direct deposit, minimum balances or the use of Bank of America credit cards.
But is the near-death of the monthly debit card fee a win for consumers or will other fees and higher checking account charges simply replace them? According to Odysseas Papadimitriou, CEO of credit card comparison website CardHub.com, consumers will have some time to celebrate.
“Banks are entering a holding pattern,” Papadimitriou says. “We may see some tests, but no major decisions [on new fees] will be made for at least six months.”
Papadimitriou says that many banks have already found alternate ways of recouping revenue lost the Federal Reserve’s 22-cent cap on interchange fees, mostly by increasing monthly checking account fees. Citibank (Stock Quote: C), for instance, just upped its monthly basic checking account fee to $10 for those who fail to maintain a minimum balance of $1,500, make at least five debit transactions of any type each month or sign up for direct deposit. However, most major banks have similar fees between $5 and $10.
These charges should recoup well more than the $28 per customer that a CardHub study found financial institutions will lose each year as a result of the Durbin Amendment.
“Debit card fees weren’t just about making up for lost revenue, but also an opportunity to boost their bottom line,” Papadimitriou says.
Of course, the large banks may make further changes to checking account fees and minimums, depending on how many customers jump ship.
“If many consumers leave, the big banks might even bring fees down,” Papadimitriou says. “They have to wait and see how consumers and small banks react.”
Thinking of leaving your big bank behind? MainStreet breaks down everything you to know to quit your current financial institution!
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