Financial Rules Prompt Banks to Raise Debit Card Fees, Drop Perks

Published August 24, 2011

Financial services firm Wells Fargo has announced it will test a $3 monthly fee for debit card users in select states, the result of new “interchange” regulations for debit cards that go into effect October 1. The company also plans to end its debit card rewards program for all customers on October 8.

Wells Fargo’s announcement comes on the heels of steps many other banks have also taken to impose new fees and end rewards programs to adjust to expected losses of revenue.

Banks have been charging interchange fees – also called “swipe” fees – to retailers when a person uses a debit card. The fees typically have ranged from 1 to 2 percent of the transaction price. The average charge is 44 cents a transaction.

Average Fee Cut in Half

Under the new rules, required by an amendment Sen. Dick Durbin (D-IL) successfully had added to the Dodd-Frank financial industry regulation law, the maximum permissible interchange fee that a debit card issuer may receive will be the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. This cuts the average debit fees approximately in half.

“These new rules and restrictions cost banks billions of dollars, and they have to make it up somewhere. It is always the customer who ends up paying more,” says Bill Hardekopf, CEO of, a Web site that tracks the credit card and debit card industry. He is also author of The Credit Card Guidebook.

“If monthly fees for debit card users prove successful in these test markets, look for these banks to assess this fee to all their customers as well as for other major banks to follow,” Hardekopf says.

Wells Fargo plans to test a $3 monthly fee for debit card users in Georgia, Oregon, New Mexico, Nevada and Washington. Customers may avoid the fee if they don’t use their debit card or sign up for designated checking accounts.

Wells Fargo is not the first to make changes, nor is it likely to be the last, according to Hardekopf.

Others Take Similar Steps

In June, SunTrust bank launched Everyday Checking that charges customers $5 per month for debit card use. Regions Bank will add a monthly $4 debit fee to certain accounts in October. In addition to testing a monthly fee for debit card users in northern Wisconsin, Chase ended its debit card reward program for all customers in July.

Banks generally give consumers a way to avoid these fees, but they may require a higher minimum balance or a broader banking relationship,” says Hardekopf. “Unfortunately, the customers who can’t afford to carry a higher minimum balance are the ones who will end up paying the fee.”

Banks fought hard against the interchange fee regulations because interchange fees generated an estimated $16 billion in 2009, according to the Federal Reserve.