Associated Press, Published August 17 2011
Wells Fargo testing $3 monthly debit card fee in five statesCHARLOTTE, N.C. — Banks are trying out yet another fee.
Starting in October in five states, Wells Fargo & Co. will charge customers $3 per month if they use their debit card to make purchases. Customers can avoid the fee if they don't use their card or by signing up for certain checking accounts.
The guinea pigs will be customers who opened business and personal accounts in Oregon, New Mexico, Nevada, Georgia and Washington. It won't affect customers elsewhere unless they originally opened their accounts in one of those states, Wells spokesman Josh Dunn said.
No decision has been made on whether to expand the pilot program, he said.
The move comes as banks are bracing for lost “swipe fees” that merchants pay when customers use debit cards in their stores. As a requirement of the Dodd-Frank financial reform law, the Federal Reserve in June capped these fees at about 21 cents per transaction, down from an average of about 44 cents per transaction. Banks lobbied fiercely to delay or jettison the provision.
Wells Fargo isn't the first to institute such a charge and won't be the last, said Greg McBride, senior financial analyst at research firm Bankrate.com.
“The result of the change in the debit card interchange rule is that consumers get stuck with the bill,” he said.
JPMorgan Chase & Co. has been testing a similar $3 per month charge in northern Wisconsin since February, a bank spokesman said. Only one of the bank's four checking account options comes with the fee.
Some banks are also curtailing debit-cards rewards programs. Wells Fargo stopped enrolling customers in debit-card rewards programs in March.
In their test programs, banks will closely monitor customer attrition, McBride said. Some customers who pay close attention to fees will “vote with their feet” and close their accounts. Others will pay the fee to avoid the inconvenience of opening new accounts and transferring bill payment information, he said.
Dunn, the Wells Fargo spokesman, said the bank regularly reviews its pricing to “to take into account the needs of our customers, industry trends, the market competition and our cost of doing business.”
Wells Fargo debit cards offer value to customers because they are an easier payment option than cash or checks, provide 24-hour access to ATMs and come with fraud protections, he said.
Banks have been adding new fees and revoking free checking programs as they lose revenue from overdraft fees, credit card charges and now debit card swipe fees. Wells Fargo has also made changes as part of its Wachovia merger. The bank last year eliminated ATM fee waivers that some Wachovia customers once received in some accounts.
Distributed by McClatchy-Tribune Information Services.