Fees
How the Cut in Debit Card Swipe Fees Will Affect You
Banks received some long-awaited news last week: the Federal Reserve voted to cap fees charged to retailers on debit card transactions at roughly 24 cents per transaction, down from an average of 44 cents. Financial institutions had feared the Fed’s initial proposal of a 12 cent cap would go through, which would have been a buzz cut — a 73% revenue loss in what trade groups estimate amounts to a $20.5 billion a year income stream for banks. The Fed also delayed implementation of the new rule until October, yet another sign of the long, heavily lobbied debate.
Bank and credit card company stocks were initially up on the news, though Chris Brendler, managing director of brokerage and investment banking firm Stifel Nicolaus, cautions that American Express (AXP), which does not offer a debit card, may see its merchant fees come under increased scrutiny, as they are relatively high, especially when compared with capped debit card fees. Read more…
Bank of America to Eliminate Overdraft Fees
A recent proposal by the Federal Reserve Board would prevent lenders from automatically issuing overdraft fees when consumers surpass their debit limits.
One commercial bank is echoing this effort by eliminating overdraft fees on debit accounts this summer. According to a recent announcement, Bank of America customers will only be able to make transactions if they have enough money in their account. The company currently charges $35 for those who overextend their debit cards.
The bank’s Overdraft Protection plan will allow consumers to use another form of payment or funds from their savings or other accounts to cover purchases. Consumers will also be warned at ATMs if withdrawing a certain amount of cash would overdraft their account.
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