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Federal cap spurs debit fees at banks
Many community banks too small to be affected by changes
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Consumer-estimated fees

Most bank customers find ways to avoid bank fees, according to an American Bankers Association customer survey released Thursday.  Consumers gave the following answers when asked to estimate how much they spend in monthly fees for services such as checking account maintenance and ATM access:

• 71 percent said they pay nothing

• 11 percent said $3 or less

•  6  percent said $4 to $6

•  4 percent said $7 to $9

•  7 percent said they pay $10 or more

Source: American Bankers Association/Ipsos Public Affairs

Debit card users at major banks may feel a pinch this fall as banks enact a variety of fees to recoup lost revenue for debit transactions.

The fees come as a result of federal regulation that puts a 21-cent cap on the amount banks can charge vendors for debit transactions — ultimately shifting the expense from merchants to customers, according to Georgia Bankers Association Vice President David Oliver.

Before, banks charged merchants anywhere between 1 and 2 percent for debit transactions, which means they stood to make greater profits from greater purchases, Oliver said. On average, banks currently are charging merchants 44 cents per debit transaction.

In search of a way to make up the lost revenue, Wells Fargo and SunTrust are in the process of informing their customers how fees — usually a flat monthly charge — potentially may affect them.

Beginning Oct. 14, holders of certain types of accounts at Wells Fargo will face a $3 fee each month if they use their debit cards, according to spokeswoman Jamie Dexter. Worldwide Military Banking accounts are among the ones that will not be charged.

The Wells Fargo fee applies to certain accounts that were opened in Georgia, New Mexico, Nevada, Washington and Oregon, even if customers since have moved out of state, Dexter said. Likewise, those whose accounts were not opened in one of the five test states will not yet have to pay the fee.

Dexter emphasized that debit cards come with a host of conveniences, from cash withdrawal to fraud monitoring.
“For customers who appreciate that service, that fee, if you think about it, will just be a dime a day for the convenience of using your debit card,” Dexter said.

SunTrust has introduced a $5 monthly fee for unlimited debit card purchases for its new Everyday Checking account, but customers can opt out of the fee by not using their debit card for purchases during a particular month, according to spokesman Mike McCoy.

“Generally speaking, clients can avoid fees with any of the accounts based on the depth of their relationship with us,” McCoy said, adding that keeping a certain account balance or using direct deposit can prevent other fees from piling up.

Though it does not currently have a debit fee in the works, Bank of America is reassessing its banking services and moving to a model where account holders choose their services a la carte, according to spokeswoman Christina Beyer.

“It’s no longer a one-size-fits-all proposition,” Beyer said.

Many account holders have expressed frustration over the fees.

Hinesville resident Jack Graves, who currently is working as a substitute teacher, said he made a great decision in moving from a larger bank to a small-town community bank with “free checking and some places that really know you by name.”

“If it isn’t the government, it is these banks that will take all they can of the working person’s money,” Graves said.

Though the charges anger some bank customers, Oliver wants to remind them that debit cards have not always been free at banks.

“I remember my first debit card — the bank that I did business with, there was a $1 a month charge for my account,” he said, adding that banks also charge fees for other services, such as online account management and checking.

One of the challenges that come with explaining the fees to account holders is reminding them that banks are businesses that provide services, just like restaurants and stores, Oliver said.

“Debit cards and other banking products and services are just that — they are a service that banks provide, they give customers convenience, access to their money, security through not having to carry cash around and security through the FDIC,” he said.

“If you think about the debit-card system, there’s technology, there’s hardware, there’s software, there are people — it takes a lot to run that, and that network has been developed over time,” he said, explaining the need for banks to cover operational costs for debit support.

Account holders at smaller banks may relish one aspect of the rule: The cap only applies to institutions with $10 billion in assets or more.

The onslaught of fees at larger banks may give smaller ones a boost in drawing customers, as many will either have to change their habits or find a lower-cost provider to reduce their banking costs, according to Jim LaHaise, chief banking officer with The Coastal Bank.

The Coastal Bank currently does not have such a fee in place, and it does not plan to enact one, he said.

But LaHaise emphasized that banks will continue to make adjustments to comply with external regulations.

“What’s happening is there is continued pressure on the financial industry as a whole from changes in regulatory policy,” he said. “So it’s likely that we’ll see more of these fee-for-service types of issues occurring.”

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