Banks were quick to chop debit card rewards once Congress passed the Durbin Amendment, while the next likely step of adding fees to recoup lost interchange revenue is being done at a slower pace.
"Banks are all watching each other because there is a first-mover disadvantage in this case," Ed Lawrence, the director of the Debit Marketing Roundtable at Auriemma Consulting Group, said, ATMMarketplace.com reports. "The first-movers to institute debit/checking fees in a given market will experience the most scrutiny and possible attrition, along with negative press; as others follow, customers will have fewer places to move to."
Banks and debit card issuers have been charging an average of 44 cents per debit card transaction through interchange fees, but the Durbin Amendment recently capped that fee at 21 cents. The cap is estimated to cost the financial industry billions of dollars in profits each year.
The Debit Report, produced by ACG, indicates the new pricing will put a significant amount of spending in play, ATMMarketplace.com reports.
In June, less than 10 percent of debit card holders paid a fee for their debit accounts, although some major banks, such as Bank of America and Wells Fargo, have recently announced that they have started testing various new fee structures.
A few banks, including Citi, said that they will not be adding new fees.
The Debit Report showed consumers to be more likely to adapt to an elimination of rewards programs compared to added fees.
Financial experts say that new fees may be designed to shift customers away from debit cards and towards credit cards because credit cards were not subject to the Durbin Amendment.
“Debit was the biggest beneficiary of the credit crisis, followed by cash,” Sam Ditzion, the CEO of the Boston-based payments industry consulting firm Tremont Capital Group, said, according to ATMMarketplace.com. “However, now that consumers may start facing increased fees for using debit, as a result to the Durbin Amendment, we may see a slight but decisive shift toward cash and credit.”
Lawrence said most consumers will unhappily continue to use their debit cards and pay new fees.