Some banks charge fees for debit card use
Published: Tuesday, October 18, 2011
Updated: Tuesday, October 18, 2011 04:10
Some debit card holders might think twice the next time they get ready to swipe their cards at a cash register.
The Durbin Amendment, enacted Oct.1 and named for its author, Sen. Dick Durbin (D-Ill.), limits the fee that banks can charge retailers for debit card transactions. The amount of money retailers have to pay banks for each debit card swipe will decrease from 44 to 24 cents.
The amendment is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which went into effect in July 2010, which increased government involvement with and control over large corporations. It also helped identify and address gaps in regulations that could affect the country's overall financial stability.
In an effort to make up for a loss in revenue, several banks have levied additional fees on their debit card using customers.
Wells Fargo Bank and Chase will charge $3 a month for debit card users. SunTrust Banks will charge $5 a month, and HSBC and TD Bank will increase their ATM fees.
In addition, Chase, PNC Bank and Wells Fargo Bank eliminated their rewards programs, which rewarded customers with gift cards who frequently swiped their debit cards at cash registers.
Trish Wexler, a spokeswoman for the Electric Payment Coalition, an organization representing a collection of banks and financial companies that transmit electronic payments, such as HSBC and Wells Fargo, said most banks would try to recoup their losses through the additional fees.
"If you have a debit card, chances are your bank that issued that card is going to have to find away to make up for the lost revenue," Wexler said. "Some banks will charge for checking, some will charge for debit, some other banks will lay people off."
On Wednesday, Rep. Jason Chaffetz (R-Utah) and Rep. Bill Owens (D-N.Y.) announced they are creating a bill to repeal the Durbin Amendment because of the consequential effect on customers.
Wexler said reversing the law would help reduce restrictions on purchases made by consumers.
"If it's repealed, we can go back to the free market pricing," Wexler said. "At that point, consumers would certainly benefit—anytime there's less regulation on a market consumers are the beneficiaries of that."
Fred Solomon, a PNC Bank spokesman, the university's financial services partner, said his bank will not charge an additional fee.
"PNC does not charge its customers a fee for debit card use and PNC has not announced any plans for such a fee," Solomon said.
Economics professor Burton Abrams said the law is both a price relief for businesses and a method of cost control that can distort the market, which is why banks are charging extra fees.
"On the surface it's trying to help the business owners, but it's a price control and whenever you control a price, whoever's able to get the product for a lower price benefits," Abrams said. "But there are other losers that occur."
He said the law may not help business owners as much as some might think.
"I've heard some discussion that maybe all of those cost-savings aren't passed through to the merchant quite as the law seems to indicate it should be," Abrams said.
Ritchie Colliss, manager of Cucina Di Napoli, said it is beneficial for him as a business owner to be charged less for transactions, however, it is negative for customers who are charged these additional fees.
"I'd say all round the spectrum it's a sh—y deal—getting charged for any debit card period whether it's the business owner or the other person," Colliss said. "It's just a transaction from your account, not any line of credit, so I don't see how they could try to get money from you in that sense. It's essentially your own money."
Wexler said debit cards are the most popular noncash method of payment among consumers and students are a large percentage of those users. Senior Shaun Markowits, said he uses his Wells Fargo debit card frequently. He believes the charges are unfair, and is seeking out a new bank because of them.
"Even [$3] sounds like such a small amount, because we're keeping our hard-earned money in the bank, it was what the bank was made for, to be charged for that doesn't seem to be logical to me," Markowits said.
Sophomore Stephanie Meyer said she has bank accounts with PNC and Citiiank, which are not currently charging for debit cards. However, she said she sees both sides of the situation.
"It's kind of tricky because they're trying to make up for the fact that they did have a different source of revenue and now they don't have it anymore," she said. "I know a lot of people who do rely on their debit cards, and that's going to hurt them."