With new federal rules capping interchange fees poised to take effect this fall, banks across the country have responded by calling it quits on debit rewards programs.
Even while public debate was still brewing, a number of U.S. banks decided action was necessary to protect their businesses’ and began ending rewards programs, arguing that such programs were funded in large part by the interchange fees they collected. For example, Chase Bank made the decision to end new enrollment in debit rewards programs and started enforcing this new rule July 20. While the bank did temporarily reverse this policy change, it ultimately decided to stick with its initial decision when regulators finalized interchange fee cap rules in late June.
Where to Go for Debit Rewards:
Banking customers looking for rewards aren’t without options. BBVA USA Bancshares Inc., plans to end its traditional debit rewards program and begin a new merchant-funded debit rewards program where customers earn points for using their debit card to shop at certain retailers.
KeyCorp of Cleveland, actually has plans to enhance its retail bank’s debit rewards program rather than end it. According to the bank’s spokesman Dan P. Davis, the bank will expand its debit rewards program to include additional perks not just for debit card use, but also for customers broadening their relationship with the bank.
Other banks have also made the decision to begin offering merchant-funded rewards programs using the services of companies like Intuit Inc. Online banks like Ally Bank and Bank of the Internet have also begun to offer new merchant rewards services to fill the void left by banks like Chase and Wells Fargo. Both banks began offering rewards programs that allow customers to automatically earn discounts for shopping with certain retailers.
For those unaware of how the interchange fee caps will affect their banking services, here’s how some of the nation’s largest banks have responded to the new rule. Since a number of the largest U.S. bank don’t necessarily offer debit rewards programs, the list also paints a picture about how some banks could alter additional retail banking services.
Have/Will End New Enrollment:
- Regions Financial Corp, Ended new enrollments March 1
- Wells Fargo & Co., Ended rewards program on March 20
- SunTrust Banks Inc., Ended new enrollments on April 15.
- Fifth Third Bancorp, Ended reward program in late April, plans to permanently end program in July.
- USAA Bank, Will end program on Sept. 1
- US Bancorp, Ended new enrollments Feb. 15
- PNC Financial Services Group Inc., Will end new enrollments on Sept. 12
- BVAA Compass: Will end its debit rewards program and begin offering merchant-funded rewards program on Sept. 20. Existing rewards customers will be able to keep their points
Still Reviewing Impact of New Rule on Banking Services:
- Citizens Financial Group
- First Niagara Financial Group
- HSBC North America Holdings Inc. (has no debit rewards program)
- Northern Trust Corp. (has no debit rewards program)
- Huntington Bancshares Inc. (no debit rewards program)
Will Not Change Banking Services:
- Bank of America® NA
- Capital One Financial Corp.
- TD Bank US Holding Co.
- ING Direct
- New York Community Bank
- Hudson City Bancorp Inc.
- E*Trade Bank (doesn’t have debit rewards program)
- KeyBank (will enhance rewards program this fall)
Banks that Couldn’t be Reached/Declined Comment:
- BB&T Bank
- Harris Financial Corp.
- Union Bank
- M&T Bank Corp.
- BancWest Corp.
- Zions BanCorp
- Popular Inc.
- Synovus Financial Corp.
- People’s United Financial Inc.
When the new rule takes effect in October, it will cap the amount of debit card swipe fees the nation’s largest banks can charge merchants to 21 cents. A previous version of the bill would have capped interchange fees at 12 cents per transaction, which could have slashed the revenue collected by debit card issuers by as much as $16 billion annually.
Additional reporting contributed by Zachary Ehrlich