How much is your debit card worth to you?
August 22, 2011
In less than the space of a generation, debit cards have gone from being a convenience to a near necessity for many people. The question now is whether bank customers will have to pay a price for this evolution.
Two major banks, JPMorgan Chase and Wells Fargo, are testing a $3 monthly fee for debit cards in some markets. Customers in those areas now face a decision about whether the use of a debit card is worth $36 a year, and consumers nationwide may soon have to make a similar choice.
While a variety of financial pressures have banks revising their business models, the most direct cause of debit card fees is the Durbin Amendment, which was one of the provisions of last year's Dodd-Frank banking reform bill.
The Durbin Amendment puts a cap on how much banks can charge retailers for processing debit card transactions. While banks previously charged an average of 44 cents per transaction, those charges are now capped at 21 cents. This is a windfall to retailers, but slashes an important revenue source for banks. Debit card fees, such as those being tested by JPMorgan Chase and Wells Fargo, are one way of trying to recoup those revenues.
Checking account fees
$36 a year might not sound like too high a price to pay for the convenience of having a debit card, but it has to be viewed in the context of other checking account fees, which are already becoming more prevalent. The most recent MoneyRates Index fee survey found that the percentage of checking accounts with no monthly fees dropped from 37.68 percent to 34.74 percent in the first half of 2011.
While checking account fees are becoming more common, and debit card fees may add a new layer of charges, bank customers still have something in their favor--choice. There are still a great many banks to choose from, so with a little effort consumers can still choose not to pay checking account or debit card fees.