July 20, 2011
Bank of America and Wells Fargo on Tuesday both said they project the new caps on debit interchange fees will do less damage to earnings than originally they initially expected, according to Reuters.
The companies updated their estimates after the Federal Reserve changed its first proposal for a 12-cent cap to one of 21 cents per transaction.
“BofA, the largest U.S. bank by assets, said it expects a $475 million quarterly reduction in card revenue — or $1.9 billion annually,” reports Reuters. “That figure is lower than the $2 billion annualized loss BofA initially projected, absent any other efforts to recover lost revenue. San Francisco-based Wells Fargo said the change should cost the bank $250 million per quarter, down from a $325 million estimate earlier this year.”
Bank of America consumer bank chief Joe Price back in March stated that annual revenue for the sector could drop by as much as $12 billion to $14 billion after the Fed’s original debit interchange proposal.
Many banks are cutting back on free services or rewards programs in order to recoup revenue that will be lost in light of debit swipe fee caps.
USA Today recently featured roundup of some of the new bank service fees consumer can soon expect to see:
– Bank of America will assess a $5 fine for lost debit cards starting in September.
– U.S. Bank will raise the annual cost for individual retirement accounts to $30 from $10. (Customers who have a balance of $25,000 or more in an IRA or other U.S. Bank accounts will be exempt from the charge.)
– Expect an increasing number of banks to raise ATM fees while eliminating free checking , according to USA Today.
Retailers are unhappy with the Fed’s decision to up the debit interchange limit to 21 cents, reports the newspaper, which could result in few discounts at stores. Click here to read more.