New bank regulations mean more fees for you

(RNN) - Many U.S. banks may pass along higher fees to their customers thanks to new banking regulations slated to take effect Oct. 1.

Under its new fee schedule, Bank of America will charge debit card users $5 per month beginning early next year. The Southeastern chain Regions Bank will raise non-ATM debit card fees Oct. 1.

Chase Bank is testing a $3 debit card fee in some states.

The new banking regulations came about in order limit how much money banks can charge a business for each debit card purchase. Businesses will now be charged 21 cents per swipe – a 50 percent decrease from the previous average of 44 cents.

Allison Joseph, the owner of Four Corners Art and Frame in Seattle, told KING5-TV the amount of money per month she was being charged by her bank for debit card purchases was just too much.

"I don't mind paying a fee, but $200 to $300, it's hard to pass that on to the customer," Joseph said. It's only a matter of time, she says, before she expects her bank to notify her of more fees.

Limiting some of the fees banks can charge businesses will cost them billions of dollars.

Bank of America spokeswoman Betty Riess said the bank will lose an estimated $2 billion annually. Wells Fargo spokeswoman Lisa Westermann said the bank will lose $250 million per year.

"This has been a major source of revenue, and the loss of it has to be replaced," said Keivan Deravi, professor of economics at Auburn University Montgomery.

Banks are now looking to their customers to make up the difference. Some banks, like Wells Fargo, will do away with debit card rewards. The bank could also institute new fees.

"We are test-piloting a monthly debit card fee, which would be $3 a month for people who use their debit cards to make payments and purchases," Westermann said.

Other banks are investigating new payment methods that bypass the debit card many consumers turn to in lieu of credit cards.

Wells Fargo has tested a pay-by-phone program in the San Francisco area.

"You always have your phone in your hand," Westermann said. "Instead of trying to dig in your purse, just swipe your phone."

New payment methods are a far cry from the intended purpose of the Durbin Amendment, which was to "ensure that the fees that small businesses and other entities are charged for accepting debit cards are reasonable and proportional to the costs incurred."

"I don't think any of these regulations imposed on any of these financial instruments will be effective," Deravi said. "It just moves the burden from one group to another group."

Consumers looking to avoid the additional charges from big banks by escaping to community banks or credit unions – which are exempt from the new regulations - are unlikely to see much relief.

Deravi said he expects smaller institutions to follow suit sooner rather than later.

And he said it's possible banks may stop offering debit cards entirely.

In any case, the new regulations may prove to be just one way for the government to show it still has the upper hand, Deravi said.

"This is a very small and insignificant of a reaction to the banking deregulations of the '80s and '90s," he said, adding that it would do nothing to help the economy.

"Our economic problem is much more serious than this, much more serious."

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