September 12, 2011
Many banks and credit unions have recently been testing monthly fees on their debit cards, but that approach could come back to haunt them according to a just-released survey by Dallas-based SWACHA, one of the largest not-for-profit regional electronic payments associations in the country.
Last month, SWACHA conducted its second Consumer Insights Survey, which tracked consumer trends in electronic payments such as debit and credit cards and mobile banking. SWACHA’s first Consumer Insights Survey was conducted in 2009.
According to SWACHA’s survey, consumers are taking a firm stand against debit card fees. The survey revealed that 93 percent of Texans would either change banks or use another payment method when faced with debit card fees. Most revealing was the fact that when asked to identify what level of monthly fee would cause them to cancel their debit card, 62 percent of those surveyed claimed that a $5 monthly fee would cause them to cancel.
“Financial Institutions that are looking to increase revenue by charging customers a fee to use their debit cards may lose money in the long run by driving away customers,” said Dennis Simmons, AAP, SWACHA president and CEO. “We commissioned this survey to provide guidance to our members on what consumers are thinking and doing when it comes to electronic payments. The use of monthly fees on debit cards definitely throws up a red flag.”
The concept of debit card usage fees spawned when the Dodd-Frank Act was signed into law in July 2011. The Dodd-Frank Act cut an estimated 45 percent of interchange revenue for banks through methods such as capping debit card swipe fees imposed on retailers. This prompted debit card issuers to search elsewhere to make up the difference.
“In today’s economic climate, consumers are more sensitive when the burden of additional cost is placed upon them, and they don’t put up with it for very long,” said Simmons. “Debit card issuers who try to close the gap of lost revenue by passing the burden to their customers may want to rethink that approach.”
About the Survey:
SWACHA’s online survey of 600 Texans was conducted in August 2011 by Decision Analyst with a confidence interval of 95 percent and a corresponding margin of error of +/- 4 percent. Only those respondents who identified themselves as the person responsible for paying household bills were permitted to complete the survey.
SWACHA-The Electronic Payments Resource®, is one of the largest not-for-profit regional payments associations in the country with approximately 1,100 members across the Southwest. SWACHA is the resource of choice for financial institutions and corporations in the areas of education, training, payments system risks and knowledge about electronic payments.
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Editor’s Note: This is the first in a series of releases based on SWACHA’s 2011 Consumer Insights Survey.