Debit card fees may make them less popular
NEW YORK – Americans prefer using their debit cards at the register. But a small fee could change that.
A new Associated Press-GfK poll finds that about two-thirds of consumers use debit cards more frequently than credit cards. But when debit card holders were asked how they would react if they were charged a $3 monthly fee for their debit card, 61 percent say they’d find another way to pay.
The findings come at a time when consumers are seeing unwelcome changes to their debit cards and the checking accounts to which they’re linked. Although banks haven’t started imposing monthly fees for debit cards, there are signs higher costs could be on the way.
Starting in October, a new cap will sharply limit the revenue banks can collect from merchants whenever customers swipe their debit cards. That revenue has been a critical income source for banks; merchants paid issuers $19.7 billion for debit transactions in 2009, according to the Nilson Report, which tracks the payments industry.
Consumers are already seeing the fallout. Chase, PNC Bank and Wells Fargo ended or scaled back their debit rewards programs citing the new regulation. The availability of free checking accounts also declined last year for the first time since 2003.
For now, the notable preference for debit could be linked to a negative sentiment about credit cards; nearly half of respondents to the AP-GfK poll say the interest rates they’re charged are unfair.
That may be because 30 percent had their interest rates hiked in the past two years. That’s more than twice the number who say their rates were lowered.
The higher rates and fees may have surprised consumers in light of the new regulations that were intended to protect cardholders and put an end to questionable billing practices.
Despite the widespread discontent with interest rates, the regulations are having a clear, positive impact in one area: monthly statements. Nearly half of respondents say they’re now easier to understand.