SAN FRANCISCO -- In an effort to recoup revenue lost through interchange-fee reforms, Wells Fargo & Co. plans to test a debit-card activity fee of $3 a month when a customer makes a purchase or payment (including recurring payment) with his or her personal or business debit card, check card or ATM card linked to a Wells Fargo business or personal checking account opened in Oregon, New Mexico, Nevada, Georgia and Washington, starting October 2011.
Lower debit-card swipe fees are set to that take effect October 1. Those fees were valued at nearly $20 billion in 2010, [image-nocss] according to The Winston-Salem Journal, citing The Nilson Report.
On June 29, the Federal Reserve ruled that banks can charge retailers 21 cents each time consumers swipe a debit card. The average is 44 cents a swipe (click here for previous CSP Daily News coverage).
"The new interchange rate is approximately 50% less than the current market driven interchange rates. The new price cap does not take into account all the costs associated with debit cards, including processing, fraud prevention/losses and administration. The debit card fee is one of those ways we are looking at trying to recoup those costs," Wells Fargo spokesperson Lisa Westermann told CSP Daily News.
Customers who pay the fee will continue to get zero liability fraud protection, 24x7 fraud monitoring, My Spending Report and card personalization via Wells Fargo's Card Design Studio, she said. Customers are being notified beginning this month through monthly checking statements, ATM messages, email and statement inserts.
"In [Wells Fargo's] earnings announcement, we talked about recovering 50% of the lost revenue over time through product changes and volume growth. This is one of those ways .... We regularly review our pricing and take into account the needs of our customers, industry trends, the market competition and our cost of doing business. Our goal is to set a fair price that is consistent with the value of each product or service," she added.
Large and small financial institutions, as well as MasterCard and Visa, successfully complained that the initial Fed decision to drop the interchange fee to 12 cents a swipe was too low for them to cover the cost of providing debit-card services. Financial institutions insist that potential consequences of a lower interchange fee are consumers being forced to alter their use of debit cards, accept more fees, lose reward programs and possibly do without the convenience of using the cards.
Wells Fargo joins JP Morgan Chase in testing consumer reaction to a debit-card fee, said the report.
An Associated Press-GfK poll in July found that about two-thirds of consumers use debit cards more frequently than credit cards. When asked how they would react if they were charged a $3 monthly fee for their debit card, 61% said they would find another way to pay. If the fee was $5 a month, two-thirds said they would do the same. If the fee was $7, the figure rose to 81%.
Greg McBride, a senior financial analyst at Bankrate.com, told the Journal that other banks are likely to charge the monthly debit-card fee. "But even as more banks test and institute fees for carrying or using a debit card, the practice will remain the exception rather than the rule," he said.
Jeff Lenard, communications director for the National Association of Convenience Stores (NACS), told the newspaper that banks "simply are not credible on the issue." He said if reducing swipe fees results in higher fees to bank customers, then the tripling in swipe-fee charges over the past decade should have led to lower customer fee.
"That has not happened," Lenard said. "If they do pass on fees, it's really because they want to."
San Francisco-based Wells Fargo is a nationwide, diversified financial services company with $1.3 trillion in assets. It provides banking, insurance, investments, mortgage and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet and other distribution channels across North America and internationally.
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