Sep 5, 2012, 8:00am

Contrary to the litany of industry arguments, the monthly service fees banks charge consumers are in fact not related to debit swipe fees, said the Merchants Payments Coalition (MPC) today after analyzing new data released by moneyrates.com and Bankrate.com.

Since the passage of the Durbin Amendment, the nation’s banking and credit card industries have contended that the newly imposed reduction in debit card swipe fees has forced them to increase the fees they charge consumers for services such as checking accounts.

However, a MPC examination of moneyrates.com and Bankrate.com data shows just the opposite.

“Swipe fees have tripled over the last decade, but that certainly hasn’t resulted in consumer checking fees getting cut by a similar amount,” said Tom Wenning, Executive Vice President and General Counsel, National Grocers Association.

In fact, Bankrate.com surveys show that just the opposite has occurred. Swipe fees and checking account fees have increased in tandem for six years in a row. From 2005 to 2011, checking fees jumped from $11 to $14 on average, while revenues from swipe fees grew from about $30 billion to $60 billion. (See chart below.)

Meanwhile, a moneyrates.com survey produced a surprising discovery.

“Our analysis found that big banks -- the only ones affected by the Durbin Amendment -- did not raise checking fees as much as the small sized banks that were exempted from debit reform,” said Wenning.

Small banks are competing fiercely with larger banks for their customers and have been successful as a result of offering personalized services, despite warnings by the banking industry that small credit unions and banks would suffer from debit reform.

Banks did all they could to throw consumers in front of the swipe fee reform train during the debit reform debate on Capitol Hill, said Wenning. Banks argued that if debit swipe fees were reformed, then they would have no choice but to charge consumers additional fees to make up for it. But they ignored the fact that banks already charged consumers as much as possible in fees and used every opportunity to raise those fees.

Both the Bankrate.com and moneyrates.com surveys make clear that consumer checking fees are not affected by what happens with swipe fees. Checking fees have their own competitive market dynamics, while swipe fees are centrally price-fixed by credit card companies.

The latest survey data from moneyrates.com (the second since debit swipe fee reform took effect) shows the following:

Banks not affected by swipe fee reform raised checking fees more.

• The data shows that small banks, which were exempt from reform and didn’t have swipe fee revenue reduced, raised consumer fees by 5.52% in the first half of 2012 – almost a full percentage point more than large banks whose swipe fees were reduced.

Large bank checking fees are almost unchanged post-reform.

• Following debit reform in October 2011, large bank fees on consumers went down and then rose later. The result is that fees today ($13.88) are about the same as they were before reform ($13.66).
• Small banks, which did not see swipe fee changes, actually increased their fees more – from $9.21 to $9.87.
• The moves up and down simply do not correlate with swipe fee changes. They show the independent market dynamics of consumer checking fees.

More large and medium size banks abolished monthly service fees after debit reform.

• Since the mid-year 2011 survey, more large and medium size banks (the only ones impacted by debit reform) do not have monthly service fees according to moneyrates.com.
• At mid-year 2011, 20.17% of large banks reported not charging monthly service fees but in the most recent survey that number had grown to 21.03%.
• At mid-year 2011, 37.86% of medium size banks reported not charging monthly service fees but in the most recent survey that number had grown to 42.74%.

Consumer checking fees have their own market dynamics.

• The chart below shows the moneyrates.com data on monthly checking fees for small, medium and large banks in their past four surveys. The first two surveys occurred before swipe fee reform took effect and the last two after it had taken effect.
• Overall, the charts show relatively stable patterns within each group of banks – even though only the large banks and some of the medium size banks were impacted by reform.
• This demonstrates that consumer checking fees are set based on the dynamics of the consumer market, and swipe fee reform does not have any significant impact on checking fees.

The Merchants Payments Coalition (MPC) - UnfairCreditCardFees.com - is a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees.

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