Posted August 19, 2011 09:35 am

Debit Card Users Being Charged Monthly Fees

In October, Wells Fargo will begin charging its debit card users a monthly debit card activity fee.


Customers will see the first charge on their November bank statement. Georgia is the only state in the Southeast selected for the pilot program, said spokeswoman Jamie Dexter.


"For our customers, if they use their debit card to make purchases, there will be a $3 a month flat fee charged to their account. So, if you make one purchase or 100, the fee is $3 a month. The marketplace has changed a lot in the last year or so, which is why this is happening. It's something that's really impacting all banks," Dexter said.


It's possible that other banks might begin charging similar fees, in response to the Dodd-Frank Act that became law in July 2010, said David Oliver, a spokesman for the Georgia Bankers Association. The law included an amendment requiring the Federal Reserve to set a fixed minimum rate for each debit card transaction for large banks and card issuers.


Merchants and retailers pay banks and card networks for the ability to process debit and credit card transactions. Now, the cost of debit card payment services has shifted from retailers and merchants to consumers. The Federal Reserve's price cap rule goes into effect on Oct. 1, Oliver said.


"Banks are reacting to replace revenue and recover costs that have been regulated or legislated away from them. Some are choosing to begin including a monthly charge for customers to use their debit card. Right now, this varies greatly by bank and even by account type. As with any product or service, banks will develop a variety of choices and account structures that allow customers to get the most value out of their accounts," Oliver said.


However, Oliver notes that debit cards have not always been free at all banks. When they were first introduced, many banks charged a monthly fee for the card. Debit cards and card usage became popular in the mid 1990s.


At Wells Fargo, there are some ways to avoid the fees, Dexter said. There is no fee to withdraw cash at the bank's ATMs. Or, customers could use a credit card and pay off their balance each month, she said. Also, a few accounts are exempt from the debit card activity fee, such as the Wells Fargo Crown or Crown Classic accounts, so Dexter encourages customers to speak with a banker to discuss their options.


For joint accounts, if a husband and wife both have a debit card, only one $3 fee will be charged per month, Dexter said.


"The fee is per checking account, not per debit card," she said.