There is no such thing as a free lunch … or a free checking account.
Wells Fargo debit card account holders in five states will see a new fee on their bank statements beginning in October. The bank plans to charge customers in Oregon, New Mexico, Nevada, Georgia, and Washington $3 a month if they use their debit cards to buy items or pay bills. The fee won’t be charged if customers don’t use their debit cards or it they only use them to make ATM withdrawals.
The pilot program is one way Wells Fargo is looking to make up for lowered “swipe fees” charged to merchants. Come October those fees (charged to merchants each time a customer uses a card to pay) will be lowered to around 21 cents per transaction. Right now that fee is 44 cents. Swipe fees were capped as part of the Dodd-Frank financial reform law. Needless to say, the banks fought tooth and nail against that portion of the law. Top banks (Bank of America, Wells Fargo, JPMorgan Chase, and US Bancorp) stand to lose billions of dollars in revenue as a result.
So the banks are scrambling to find ways to recover lost revenue from swipe fees. JPMorgan Chase has set up similar pilot programs and has been charging extra fees for debit cards in some areas. Regions Financial and SunTrust Banks also are preparing to charge a monthly fee for debit cards linked to certain accounts.
It will be interesting to see if customers who are being charged the new fees will notice. And if they do notice, will they care enough to take their banking business elsewhere? Wells Fargo hasn’t decided if it will expand the new debit card fee program. I’m guessing that it will wait and see if there is a big backlash.
In theory, as merchants pay less for swipe fees they should charge customers less for services or products. However, it is rather unlikely that any retailers, restaurants, or other merchants will actually lower their prices any time soon. And since banks are receiving less revenue from the swipe fees they’ve got to find ways to charge fees elsewhere.
The burden here is on the beleaguered consumer, who is getting hammered on both ends.