At an industry conference on Thursday, bank executives explained that their decision to pull back on debit card fees doesn’t mean they still won’t suffer losses. Banks say they will still attempt to recover $8 billion, after a cap placed on interchange fees was implemented– and without debit card fees to bring in income, bank representatives look to revenue-generating alternatives to recover their money.
Banks to Consider Charging for Prepaid and Credit Cards
While attending the ATM, Prepaid and Debit Forum this week, executives from regional banks like BB&T, SunTrust Banks Inc., Fifth Third Bancorp and Sovereign Bank said there is no one solution for recovering the billions in revenue lost under the new cap imposed by the Durbin Amendment of the Dodd-Frank financial reform law.
The caps were placed on interchange fees, which are fees banks charge merchants for processing debit card transactions. Originally, banks were imposing as much as 42 cents per transaction, but with a cap of 21-cents implemented this month, executives are feeling the pressure to regain their revenue.
Originally, banks including SunTrust, Wells Fargo, JPMorgan Chase and other establishments decided to charge customers monthly debit fees of up to $5 only when cards were used. However, strong customer backlash resulted in all banks canceling their plans to enact debit card fees. Bank of America was the last to cancel debit card fees, doing so earlier this week.
Now executives say they will likely push customers into using prepaid and credit cards not covered by new debit card rules, as well as charge for overall use of bank accounts, to earn revenue.
Avoid Getting Hit by Debit Card Fees and Other Charges
As banks look for ways to recoup their losses, customers are looking for ways to avoid paying higher fees when using their bank accounts. The good news is there are a couple of great alternatives to consider:
- Local banks: Most community banks have fewer assets than national and regional banks, leaving them exempt from the Durbin Amendment, which only applies to banks with more than $10 million in assets. Coupled with the fact that banks want to reel in as many customers as possible, they typically don’t charge the fees of bigger banks.
- Credit unions: While there are a few statewide, regional and federal credit unions, many are locally-owned and operated. As they typically follow the “by the people, for the people” motto, you’re more likely to find more free checking options. Additionally, credit unions belong to one network, allowing you to withdraw funds from any credit union-owned ATM machine without being charged.
If you’re not interested in using a financial establishment to store money, some check-cashing establishments offer prepaid credit and debit cards that allow you to have your checks directly deposited onto them. Ultimately, there are options to avoid paying excessive fees, so look around to see what’s out there if you’re thinking of leaving your bank.