Bank Shots

More backlash against attempts to recoup swipe-fee revenue; Heartland details savings

Published in CSP Daily News

WASHINGTON -- Reflecting widespread consumer dissatisfaction over the new $5 monthly debit-card fee, Bank of America customer Molly Katchpole will hand-deliver 125,000 petition signatures today demanding that the bank cancel the fee to a branch in downtown Washington, D.C. If the bank refuses to cancel the fee, the 22-year-old part-time worker plans to close her account on the spot. Click here to view Katchpole's petition.

Meanwhile, Citibank is raising fees on checking accounts, reported CNNMoney.com. Customers who have the bank's EZ Checking account will start being charged $15 a month if they don't carry a minimum balance of $6,000, according to the report. Citi said it is phasing out the EZ Checking package, which currently carries no monthly fee, and is instead offering customers either the Citibank Account or its Basic Banking account, which also carries a fee.

Last month, Citi said it is hiking the fee on its Basic Banking account from $8 to $10. Customers will be able to avoid paying the $10 fee by either maintaining a minimum balance of $1,500 or by making one direct deposit and one automatic online payment through their checking account each month, said Citi. Currently, account holders must make five online transactions per month in order to avoid paying the fee and there is no minimum balance requirement.

Citi's fee hikes come just days after Bank of America announced its fee. Wells Fargo, JPMorgan Chase, Sun Trust and Regions Financial have all also rolled out similar fees in select markets in recent weeks.

"The regulatory environment has changed a great deal--particularly with the Durbin Amendment--and we're seeing the results of that now," Bankrate.com's Claes Bell told the website. Going forward, "we're going to see more large national banks announce fees."

With the new regulation that caps how much revenue banks can get from the swipe fees they collect from merchants, banks must look for other ways to cover that lost income, Nessa Feddis of the American Bankers Association told CNNMoney.

Citibank said it chose not to charge a debit-card fee because its customers did not want it, Catherine Pulley, spokesperson for Citi, told the website.

And following the implementation of Durbin Amendment interchange-fee reform on October 1, Heartland Payment Systems, one of the nation's largest payments processors, has released the first real-world data about the legislation's actual effects on business owners across the United States. From October 1 to October 3, Heartland passed along $1,779,568 in debit interchange reductions to its merchants across the United States.

Restaurant merchants received $671,652 of this reduction. The company estimated that its average merchant will save more than $1,000 in the first year alone.

"These savings are just the tip of the iceberg," said Bob Baldwin, president at Princeton, N.J.-based Heartland. "'Durbin Dollars' should stay where they belong--in merchants' bank accounts. ... Merchants shouldn't take this for granted. They need to be vigilant in ensuring they receive the cost savings they deserve so they don't unknowingly fall victim to processors looking to profit at their expense."

The real effects of the Durbin Amendment have already started to take hold. Based on data collected between October 1-3, 2011, across Heartland's portfolio of 250,000 merchant locations, Heartland has found:

  • 65% of its signature debit sales volume qualified as regulated.
  • On average, there is a savings of 21 cents per transaction for regulated vs. nonregulated. The average signature debit non-egulated interchange fee per transaction is 44 cents; the average signature debit regulated interchange fee per transaction is 23 cents; on average, there is a savings of 75 basis points for regulated (vs. nonregulated); the average signature debit nonregulated effective rate is 1.55%.
  • The average signature debit regulated effective rate is 0.80%.

While most merchants are realizing significant savings from the debit rate reductions, merchants that process a high volume of small-ticket transactions are actually paying more due to the elimination of MasterCard and Visa's small-ticket interchange rates. As of October, the card brands are charging the same regulated rates as standard transactions of 21 cents plus one cent plus 0.05% of the transaction volume, which translates to increased costs on debit transactions less than $11.

Heartland delivers credit, debit, prepaid card processing, gift marketing and loyalty programs, payroll, check management and related business solutions to more than 250,000 business locations nationwide. The company is also has developed end-to-end encryption technology designed to protect cardholder data.