Local bank and credit union officials said last week they have no immediate plans to eliminate free checking, but pending Federal Reserve Bank regulations may force them to reconsider.
Inland Northwest Bank President Randy Fewel said interchange fees generated by consumer debit card use are an important source of revenue for small and large banks alike.
The 31 cents Visa paid Inland for each debit card transaction last year yielded about $750,000 in gross revenue, he said. The Fed, using authority granted by the financial reform bill enacted last year, is poised to cap that fee at 12 cents.
Fewel said it costs Inland about 15 cents to process those transactions. Fraud losses add about $75,000 to costs, he added.
“They’re taking away our non-interest revenue,” Fewel said. “That’s what’s driving banks to say, ‘I can’t afford free checking anymore.’ ”
He said Inland offers two free checking programs. One may be gone by the end of the year, but another may be introduced in its place, he said.
Although the Fed cap will apply only to institutions with assets greater than $10 billion — only Sterling Financial Corp. among local institutions approaches that threshold — market forces will erase the distinction, Fewel said.
Merchants will pressure customers to use low-fee debit cards, he said.
At Spokane Teachers Credit Union, new President Tom Johnson agreed the market will flatten fees.
Free checking is a fundamental credit union service, one that would be difficult to reconsider, Johnson said. But for STCU, he noted, interchange fees produce $1 million in revenues.
Although STCU does relatively little business lending, Johnson said banks will have to weigh the loss of fee revenue when making loan decisions.
“You’re going to be affecting the bottom line of our community banks that are the backbone of our country,” he said.
Sterling and Glacier Bancorp, owner of Mountain West Bank, have no plans to tamper with free checking, spokespersons said.
Sterling spokeswoman Cara Coon said the bank is evaluating the overall effect of all the changes mandated by the financial reform act before making any decisions about product changes.
Glacier Chief Executive Officer Michael Blodnick said that holding company’s banks will stand pat.
“Right now, we have no changes in our product menu, or the prices of our product menu,” Blodnick said.