Starting Saturday, big banks must comply with a new regulation that caps the fees they can charge merchants for processing debit card purchases. But some consumers are already seeing the impact of the change, in the form of higher fees charged on their checking accounts, as banks seek to recoup lost revenue.
Bank of America is the latest bank to say it will begin charging a monthly fee for checking accounts that use debit cards. Starting early next year, the bank will charge $5 a month, in any month that the customer uses a debit card to make a purchase. (If customers have a debit card, but don’t use it, they won’t incur the fee.) The fee won’t apply to A.T.M. transactions, and it won’t be charged to customers with certain premium accounts, a bank spokeswoman, Betty Riess, said. “The economics of offering a debit card have changed with recent regulations,” she said.
Bank of America joins banks including SunTrust and Regions in charging the fees. Other institutions, like Wells Fargo and Chase, are testing them, too. And over all, bank fees have crept up to record levels, a recent survey found.
The added fees have come even though the limit on the merchant fees wasn’t as low as banks initially had feared. (The Federal Reserve originally considered a cap of 12 cents, or half of what it finally set.)
While consumers are seeing the impact of the change in their bank accounts, any potential savings benefit at stores is likely to be muted. “I don’t expect there to be any visible effects at the cash register,” said Aaron McPherson, practice director for payments at IDC Financial Insights. When similar caps were put in place in Australia, he said, merchants there didn’t pass along savings, so it’s unlikely that will happen here either.
That’s because, retail groups say, stores aren’t going to benefit as much as they had originally hoped under the new cap, and some merchants may actually pay higher fees.
The Fed earlier this year lowered the average maximum “swipe,” or interchange, fee to roughly half of what it had been previously. (Shoppers don’t pay the fees directly; banks collect them from merchants on behalf of payment networks like MasterCard and Visa, which set the rates. The rates vary depending on the type of merchant.)
Retail groups say the new cap is a “critical step” in reining in fees that contribute to higher prices for shoppers. But Brian Dodge, a spokesman for the Retail Industry Leaders Association, said the Fed, under pressure from banks, set a “deeply flawed” formula for the cap that will actually result in some retailers paying higher fees for small-dollar transactions — say, drinks sold at coffee shops.
The formula sets the cap at 21 cents, plus .05 percent of the transaction amount, plus another penny in certain cases, for fraud-control measures. That means the maximum fee on the average debit transaction of $38 will be about 24 cents, compared with 44 cents previously.
But the payment networks have indicated they will treat the cap as more of a floor in some cases, Mr. Dodge said. In short, he said, to help make up for lost revenue on big-ticket items, the networks will increase fees on smaller transactions, to bring them up to the new limit.
Retailers do retain some flexibility, he said, to steer customers away from more expensive forms of payment, like rewards credit cards, and toward less expensive methods. So consumers may eventually see some merchants, like gas stations, offer discounts for using a debit card, as some do now for payments in cash.
One impact is clear, said Paul Bragan of Wakefield Research, which has studied consumer opinion about the swipe fee debate: Consumers are much more aware of the process by which banks charge stores for the use of plastic cards, and are in favor of more disclosure of such fees. “They’re looking for greater transparency in the process, so they can understand how it will affect them,” he said.
Source: The New York Times