Being able to offer free checking accounts and free debit cards is not enough for small banks, they are willing to fork over cash to steal customers from big banks.

Bank of America’s announcement of a $5 monthly debit card fee triggered more than just a public uproar. It revved up the engines for banks’ marketing departments when press releases came one after another, boasting the banks’ commitments to free debit cards.

But, competing banks didn’t stop there because the buzz is still very much alive and it offers the opportunity to poach customers from big banks that are imposing debit card usage fees. On top of remaining fee-free, they’re paying customers to use debit cards.

A Giant Falls

The Durbin Amendment of the Dodd-Frank capped debit card interchange fees collected by banks from merchants.

While a few big banks including Wells Fargo, SunTrust, and Regions Bank began charging fees to use debit cards, Bank of America’s $5 fee drew the most attention. Customers vowed to leave the bank for smaller banks and credit unions to avoid such fees.

A 22-year-old BofA customer started a petition against the new fee and has already collected over 222,000 signatures.

Recently, a new bill has emerged with the goal to repeal the Durbin Amendment so that the banking industry doesn’t resort to charging debit cards fees to recoup lost revenue.

More Than Free

A provision of the Durbin Amendment exempts financial institutions with less than $10 billion in assets. Therein lies the reason that small banks have the audacity to pay customers to use their debit cards.

First Federal Bank of Florida, with $943 million in assets, will pay new Free Checking customers $6 per month for six months when they make 5 signature-based debit card purchases in each month.

Holding $750 million in assets, Community Bank & Co. will pay $5 per month for an entire year when new customers with Value Checking accounts use their debit cards.

Even the tiny Peoples Savings bank of Urbana in Ohio, with $86 million in assets, will credit $5 to each accounts that posts at least one signature-based debit card transaction in November, December, and January.

Such an incentive may seem attractive from a marketing perspective but it isn’t nearly as lucrative as the occasional signup offers from big banks. For example, Chase is currently handing out $125 to new checking customers.

Do you think this is a good way for smaller banks to steal customers from the likes of Bank of America?

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Simon Zhen

Simon is a research analyst for MyBankTracker. He is an expert on consumer banking products, bank innovations and financial technology.
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  • Sun W Kim

    I used to be a BofA customer but dropped them last week. I signed up for a PerkStreet checking account. They offer a debit card that gives 1% back on purchases (signature based). If I keep $5k in my checking, I get 2% back! I believe PerkStreet has about $2 billion in assets, so it will be a while before they reach $10 billion.

  • Ron will give you 2% back on non-signature based transactions and with 5k in your acct. you get 5% back. They also have sites that give you 5% back every month just fo buying from the sites.

  • Anonymous

    To me it is great, What have the big banks done for us? My wife and I are currently shopping for a smaller bank. To many rules and fees with the bank we are currently using

  • Leintellectuelle573

    Sure as pigs can’t fly,I’ll be closing my Chase account before they touch a penny of my money with their $12 (or $10 in some states) monthly fee.My checking account is one of those accounts that was rolled over into Chase’s new setup.So,I can still use my checking account the way that it was before this year.Although,if I closed it,which I am,& tried to open a new Chase account (NOT!) they would now charge me $12/month (or $10 in some states) instead of the $6 they’re charging me now.Using my card 5 times every month,just so that Chase won’t steal the money,is sad.I know that banks are for-profit businesses,but this is just pure theft,at its lowest.You know who is responsible for this whole banking nonsense:Dick Durbin

    He should have just left the banks alone,& all the other fools who encouraged Dodd-Frank too.He made it significantly worse with his amendment to the bill,but the bill was bad to begin with.Hopefully,with a new Republican president,we can get rid of Dodd-Frank completely,& Obamacare too.

    Credit unions are okay,but their ATM networks are smaller,so you have to think about that.