By Richard J. Sullivan – FEDERAL RESERVE BANK OF KANSAS CITY
In 2010, when Congress authorized the Federal Reserve to cap the fees paid to banks for debit card transactions, some news reports predicted the banks might react by increasing checking account fees. The cap on debit card fees reduced revenue significantly for some banks,and the concern was that they might seek to offset their losses by raising more revenue from checking accounts. In fact, in recent years, many of the large banks bound by the new debit card regulations have raised their checking account fees. But thousands of smaller banks that were exempted from the regulations have taken varying approaches to checking account fees. Some have raised the fees. Others have lowered them.
The net effect on consumers has remained an open question. After the imposition of debit card regulations, have changes in checking account fees benefited or hurt bank customers? What factors drove some banks to change their fees and others not? Were competitive forces important in the banks’ decisions?
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