Pro: Banks need fees to make up revenue loss


Nov. 13, 2011 at 5:13 a.m.
Updated Nov. 14, 2011 at 5:14 a.m.

Recent cuts in debit card fee mean the banking industry will lose an estimated $6.6 billion in revenue this year, according to industry estimates.

As far as how institutions meet the problem, it's a proprietary issue that each bank must work out for itself, said said Carol Kaplan, a spokeswoman with the American Bankers Association.

Prosperity Bank recently added a $1.50 monthly fee per debit card for new customers with basic free accounts, said Steve Hipes, Prosperity's chairman for the South Texas region.

The change came as a result of the recent fee reduction for point of sale purchases, he said, noting that checking accounts were never truly free.

"Expenses associated with accounts were always there, being covered by other fees, like transaction fees at point of sale," he said.

Hipes said Prosperity's Victoria locations have not received negative customer feedback regarding the fee.

Prosperity wasn't alone in its decision to enact fees.

By fall 2010, most major banks had made significant changes, according to "Economic Analysis of the Federal Reserve Board's Proposed Debit Card Interchange Fee Regulations on Consumers and Small Businesses." a study by David S. Evans, Robert E. Litan and Richard Schmalensee.

The number of accounts with free checking dropped by 11 percentage points, from 76 percent in 2009 to 65 percent in 2010, according to the study. That equals about 20 million accounts.

Both Wells Fargo and Bank of America instituted such fees, but later repealed them because of customer reaction.

Financial institutions might make additional changes in their company policies down the road, Kaplan said.

"As long as we have heavy regulatory pressures on us that we have currently, banks are going to continue to look for ways to cut costs and be able to cover their expenses at the same time," she said.



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