The move is their attempt to recoup revenues lost when new interchange, or “swipe” fee, regulations were changed as a result of the Durbin Amendment. The Federal Reserve last month set the fee at .21 cents; with fraud prevention adding on .1 cent plus five basis points, which brings the average cost to .24 cents on some transactions.
Nationwide, Wells Fargo has 40 million customers and will begin charging customers using these cards on Oct. 14 if these cards are used for purchases. ATM transactions will be exempt from the fee. It should be noted that Wells Fargo will be testing this new fee in Georgia, New Mexico, Nevada, Oregon, and Washington.
By announcing this now, before the interchange regulations go into effect on Oct. 1, Wells Fargo is getting out in front of its competitors and doing it first to gain extra revenue. We believe their assumption is that most banks will follow suit on a massive scale. Quite notably, JP Morgan Chase is charging $3 to customers in Wisconsin, and Regions Bank is charging $4, while Sun Trust charging $5. Yowza!
Wells Fargo is also contemplating charging fees on personal checking accounts, un-bundling services and raising the minimum balance in certain accounts.
While the Durbin Amendment was written into law in July 2010, banks, merchants, credit unions and many others made a push asking the Federal Reserve to delay their ruling on the fee, as they argues it was bad for business.
We believe the same to be true, but Fed made the change and unfortunately we predict more banks will announce similar banking fees as we get closer to Oct. 1.