NEW YORK - This week Wells Fargo & Co. joined a "growing number of banks" that are implementing or testing a monthly fee for consumers to use their debit cards, a move that Dow Jones Newswires reports as a way to offset lost revenue due to the Durbin Amendment.
According to the news source, 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."
Wells Fargo will begin charging a $3 monthly fee for debit cards used for making purchases on October 14 in several states, notes the news source. J.P. Morgan Chase has been testing a similar fee in Wisconsin since February, while other banks, such as Regions Financial Corp. and SunTrust decided that debit cards for some of their checking-account customers will carry a $4 and $5 monthly fee, respectively. TCF Financial Corp. is also considering monthly debit card fees for customers.
Wells Fargo and other banks have already removed rewards points from their debit cards "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," notes the news source, which is required under the Durbin Amendment.
On June 29, the Federal Reserve ruled that banks can charge retailers 21 cents each time consumers swipe a debit card, beginning Oct. 1. The average swipe fee is currently 44 cents.
The banks, furious about the new restrictions, warned that they would be seeking new ways to offset lost revenue, with one bank considering calling a new fee the "Durbin fee," notes the news source.
A Wells Fargo spokeswoman wouldn't comment to Dow Jones on how long Wells Fargo plans to test the new monthly fee in Washington, Georgia, New Mexico, Nevada and Oregon. Meanwhile, some banks are either resisting adding a new fee, including U.S. Bancorp and Capital One.
A July Associated Press-GfK poll found that about two-thirds of consumers use debit cards more frequently than credit cards, reports the Winston-Salem Journal. When consumers were asked how they??d react to a new $3 monthly fee for their debit card, 61 percent said they'd "find another way to pay."
Jeff Lenard, spokesman for NACS, told the newspaper that "simply are not credible on the issue," noting that if reducing swipe fees results in higher fees to bank customers, then the tripling in swipe-fee charges over the past decade should have led to lower customer fee.
"That has not happened," Lenard said. "If they do pass on fees, it's really because they want to."