Source: Wall Street Journal
By ROBIN SIDEL
The nation's largest banks are testing how much their customers are willing to pay for checking-account services that used to be free.
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They include an account that charges a $3 monthly fee for debit cards. Another account designed for electronic-only banking charges customers a $12 monthly fee if customers go to a teller for assistance. In the test programs, some bare-bones checking accounts also now carry base fees ranging from $6 to $9 a month.
The new fees, which are limited to accounts for new and prospective customers in the pilot programs, can typically be waived if customers meet certain criteria.
The pilot testing is the latest indication of the push to boost fees as banks scramble to make up billions of dollars of revenue expected to be lost from new federal restrictions on debit cards.
The Federal Reserve in December proposed capping the amount banks can charge merchants for debit transactions at seven to 12 cents, from an average rate of 44 cents. The Fed's proposal could reduce the revenue banks make from such fees, known as interchange, by 57% to $9.8 billion, according to CardHub.com.
Banks are testing the new programs even as they hold out hope for delays or changes to the new law, which is expected to take effect in July. They strongly oppose the measure, which was part of the Dodd-Frank financial-overhaul law enacted last year, saying it will hurt consumers because the banks will be forced to make up lost revenue by raising fees charged to their customers.
Bankers and merchants pressed their case on Thursday in a hearing before a subcommittee of the U.S. House Financial Services Committee.
Also that day, Fed Chairman Ben Bernanke, Fed board member Sarah Bloom Raskin and Federal Deposit Insurance Corp. Chairman Sheila Bair said that small banks could be hurt by the new rules, fueling more speculation that the law could be delayed or changed.
The tests are part of a broad overhaul of the basic checking account that began last year and has intensified in the past few months with the pending debit-card restrictions. Some banks, such as Fifth Third Corp., already have started scrapping the standard free-checking accounts that had been the norm since the 1990s, replacing them with services that carry more fees, as well as assorted ways to avoid them.
Chase, which has launched the tests in some of its smaller markets such as northern Wisconsin and Atlanta, is one of the first banks to explore monthly fees on debit cards.
Until now, debit cards have usually been a free part of a basic checking account. One new account Chase is testing includes a $3 monthly fee if the customer wants a debit card. It is aimed at less-affluent customers who don't keep a lot of money in the bank.
"My anticipation is that we will change these tests over time and might introduce some others," said Charles Scharf, who runs J.P. Morgan's retail operations and describes the law as "a terrible mistake for consumers, small banks and small merchants."
Bank of America this month began testing a series of new accounts throughout Massachusetts, Arizona and Georgia. The bank also is examining different fees with those accounts in different markets. For example, a basic checking account carries a $6 monthly fee in Arizona and Massachusetts, but a $9 fee in Georgia.
Bank of America started training employees for the new accounts in October, a spokeswoman said. The bank plans to roll out the new account structure to existing customers later this year. U.S. Bancorp, which recently warned that it is also planning to overhaul its accounts, this week stopped providing rewards programs to new debit-card customers.
The pilot tests are mostly confined to the biggest banks, which are better equipped to handle the costly and time-consuming research than smaller institutions.
That doesn't mean, however, that small-town banks will keep offering free services. More than 90% of small institutions expect to start charging customers for services that are now free, according to a survey released this week by the Independent Community Bankers of America.
The survey indicated most small lenders will be forced to impose monthly or annual fees for debit-card use.
