After months of high-stakes lobbying, advertising campaigns and trash talk, bankers and retailers have finally found something they can agree on. They all dislike the Federal Reserve Board‘s decision to cap the fees retailers pay every time you swipe your debit card.
By Bill Sikes, AP
The Fed’s decision to cap fees on debit cards means you will likely see higher fees elsewhere.
By Bill Sikes, AP
The Fed’s decision to cap fees on debit cards means you will likely see higher fees elsewhere.
Last week, the Fed voted to cap the fees at 21 cents per transaction, up from an earlier proposed cap of 12 cents. Banks and credit unions say the cap is still too low to cover the cost of maintaining debit card networks. Retailers say the new cap is too high, particularly for small businesses with tight profit margins. The fee cap will take effect Oct. 1.
While the higher cap will reduce the financial industry’s losses, it’s still expected to cost financial institutions about $10 billion a year, says Robert Hammer, chairman of R.K. Hammer, a bank advisory and research firm. And banks have made no secret about how they’ll recoup that money: with higher fees for everything from checking accounts to penny rolls.
The Fed rule exempts small banks and credit unions from the cap. But representatives of those institutions say the carve-out won’t work, and that they’ll be forced to raise fees, too.
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Here’s what consumers can expect:
•An end to free checking. In 2010, 65% of checking accounts offered by the nation’s largest banks and thrifts imposed no monthly maintenance fee, down from 76% in 2009, according to Bankrate.com. The number of free checking accounts will continue to shrink in the next few months, Hammer says.
There are ways to get around checking account fees. Some banks and credit unions will waive the fees for customers who set up direct deposit of their paychecks, or use their debit cards a specific number of times each month.
In addition, most banks will waive account fees for customers who maintain a minimum balance. If you have several bank and credit union accounts, consolidating them into one account could help you avoid fees, Hammer says. Do you have a savings account at your bank? Consider rolling it into your checking account. The negligible interest you’ll give up will probably be offset by the money you’ll save in monthly account fees.
•Service fees. In September, Bank of America will start charging a $5 fee for lost debit cards. On July 29, U.S. Bank will increase its annual fee for individual retirement accounts to $30 from $10. The fee will be waived for customers who have a balance of $25,000 or more in an IRA or other U.S. Bank accounts.
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Other banks are charging fees for everything from paper statements to talking to a customer-service rep. Some will charge a fee for closing your account within six months of opening it.
These fees aren’t always easy to find, according to a 2010 survey by the U.S. Public Interest Research Group. Only 38% of bank branches complied with a simple request for a schedule of fees required by the Truth in Savings Act, PIRG said. Only after two or more requests did 55% of banks provide the information, PIRG said.
To avoid surprises, read the fine print in the monthly statements and notices you receive from your bank. If you’re unhappy about a fee, or feel blindsided, call your financial institution and complain, Hammer says. Your bank may agree to waive the fee, particularly if you’re a longtime customer and have several different accounts with the institution, he says.
•ATM withdrawal fees. Raising fees for out-of-network ATM withdrawals is an easy way for financial institutions to raise revenue, so look for these fees to increase. Earlier this year, JPMorgan Chase scrapped a pilot program that charged non-customers $5 to use out-of-network ATMs. But plenty of banks still charge up to $3.50 for out-of-network withdrawals.
Unlike some other bank fees, ATM surcharges are avoidable. Get cash from your network ATM before venturing into unfamiliar territories. Should you come up short, try to get cash back when you use your debit card to make a purchase. Not all retailers give cash back, though, and some limit the amount of cash they’ll give you.
•Fewer discounts. In anticipation of the 12-cent fee cap, some retailers said they would lower prices. Others said they would offer discounts to debit card users, similar to discounts offered to customers who pay with cash.
But the higher cap could force retailers to rethink such deals, Mallory Duncan, chairman of the Merchants Payments Coalition, said last week. The higher cap, he said, “makes it more difficult for merchants to provide the level of value and benefits we were going to provide.”
Readers: Have you been hit with new bank fees? E-mail details to: sblock@usatoday.com. Follow on Twitter: www.twitter.com/sandyblock.
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