Debit card fees charged by banks now

Now, the major banks will slowly introduce the monthly fee on debit cards, starting October. The smaller banks however, will wait and watch before it decides to go ahead with the monthly fee. Banks have lost a huge amount of revenue due to the recent changes in the rules and regulations where there are caps on what the banks can charge the customers as well as retailers. The Durbin Amendment to the Dodd-Frank Act has slashed the amount that banks could charge merchants as swipe fees when customers used their debit cards to complete their transactions. This fee has been slashed in half and that has cut into the banks’ profit margins.

SunTrust, First Tennessee, Well Fargo, and Regions Bank are all testing the fees that range from $3 to $5 on some accounts. This is a reverse trend from a time when free checking as well as complimentary debit cards was the trends, say officials.

Mel Campbell, media relations manager, Regions Financial Corp stated that the monthly debit card fee will be charged when the card is used for at least one transaction during a statement cycle. However, this is not applicable for ATM withdrawals, he added.

In the meanwhile, some of the smaller community banks such as the Chattanooga-based Cornerstone Community Bank as well as the Bank of LaFayette may be in a position to avoid the fee, as the smaller banks that have assets less than $10 billion are exempted according to the Durbin Amendment.

Frank Hughes, the president & CEO of Cornerstone Community Bank has stated that at least things will not change in these smaller banks as it will continue to remain this way. This will also help in bringing customers from regional banks to community banks.

Since, the smaller banks can continue to collect the entire amount from the retailers; they don’t have to turn to customers to earn extra revenue.

However, there is a catch here. All the electronic payment networks such as MasterCard and Visa, to which the smaller banks subscribe – the switches, routers, and the servers are all owned by the major banks.

Blake Strickland, President and CEO, at the Tennessee Valley Federal Credit Union, states that nine out of ten times these things have a trickle-down effect. The ramifications of this will certainly be felt by the smaller banks as well. However, as of now, MasterCard and Visa networks claim that they can differentiate between the electronic traffic from big banks and small banks.