As large banks scramble to recoup fees lost by pecuniary regulatory changes enacted earlier in the month, some smaller financial institutions are reaping the benefits, seeing an increase in both new accounts and consumer goodwill.
The biggest change some customers are seeing? Monthly charges for debit cards, the usage of which has rapidly become a way of life for many shoppers and have traditionally been free.
Regions Bank announced its $4 per month debit card fee at the beginning of October, enforcing it for point of sale transactions. The one-time monthly fee will not be charged for months in which there are no point of sale purchases, and it will not apply to ATM purchases. Some accounts will be exempt from the fee.
Similar increases have been enacted — or are scheduled to take place by next year — at Bank of America, Chase, Citibank, SunTrust and Wells Fargo.
“Regulations have changed and, as a result, we and other banks are adjusting how we cover the costs of providing debit cards,” explained Evelyn Mitchell, a corporate communications representative for Regions Financial. “… We know that many consumers enjoy the convenience of using a debit card to make payments, and we encourage our customers to talk with their banker about which account best fits their needs.”
So what’s to blame for the changes? Mainly, new federal legislation called the Dodd-Frank Act, which was designed to protect small banks, as well as consumers, against predatory or abusive practices by financial providers. The act, among other things, limits the fees banks can charge for overdrafts and late credit card payments, and caps the fees merchants are required to pay for each debit card swipe at the cash register at 24 cents.
Unable to recoup costs through traditional means, many large banks are turning to customers to make up the lost revenue, explained John Gibbons, president of Triangle Federal Credit Union in Columbus.
It’s an issue that has incensed customers and led to a “healthy flow” of new accounts for Triangle, which has not enacted any new fees and does not charge for debit card usage.
The credit union has increased its membership by more than 20 percent over the past year, and a new branch which opened in East Columbus in April is already “at capacity,” he said.
Renasant Bank has also seen an increase in new accounts over the past few weeks, a fact President Bill West said he hopes is due to his bank “trying to do the right thing in the community.”
The Columbus branch opened in November, and a branch recently opened in Starkville.
“This has been a hot-button, from the national news on down, particularly with the mega banks,” West said. “As it’s filtered down into the community banks and our region, it’s become a subject that a lot of our customers are discussing.”
Many are doing more than just discussing the issue, said Moak Griffin, executive vice president of BankFirst. While his bank is making a push to highlight their free debit cards and Reward Checking, which offers 2-percent interest, he’s finding that consumers are doing their own research and coming into the bank prepared to make the switch.
At least 50 percent of new customer accounts are opened by customers who said they first compared banks and services online before deciding to switch to BankFirst.
Griffin said the debit card issue is a “big deal,” because consumers have not only gotten used to the convenience of debit cards — they’re accustomed to getting that convenience for free.
Another trend he’s noticing is an increased desire for mobile banking services among the under-30 crowd and online banking for people over the age of 60. In a few years, he expects to see his bank opening as many online accounts as accounts at the traditional brick-and-mortar branch.
“It’s extremely important,” Griffin said. “For a certain segment … that’s the way they’ll bank forever.”
Meanwhile, many banks enacting new fee structures — including Regions — are encouraging customers to review the changes and speak with a customer service representative about their particular needs.
Carmen K. Sisson is the former news editor at The Dispatch.
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