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The impact of debit card regulation on checking account fees

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  • Richard J. Sullivan

Abstract

Starting in 2011, when new regulations capped the interchange fees paid to banks for debit card transactions, some news reports predicted banks might increase checking account fees. The cap reduced many banks' revenue and the concern was that they might offset their losses by charging more for checking accounts. Sullivan examines data from broad samples of banks and finds that many large banks raised fees?but among the thousands of smaller banks that had been exempted from the regulations, some raised fees while others lowered them. On net, consumer access to free checking actually increased. The author also explores data on factors that may have driven banks' decisionmaking, including banks' financial characteristics; aspects of the regional market in which they operate; and the degree of competition they face.

Suggested Citation

  • Richard J. Sullivan, 2013. "The impact of debit card regulation on checking account fees," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 59-93.
    • Handle: RePEc:fip:fedker:00003
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    File URL: https://www.kansascityfed.org/documents/931/2013-The%20Impact%20of%20Debit%20Card%20Regulation%20on%20Checking%20Account%20Fees.pdf
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    References listed on IDEAS

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    1. Richard J. Sullivan, 2012. "The Federal Reserve’s reduced role in retail payments: implications for efficiency and risk," Economic Review, Federal Reserve Bank of Kansas City, vol. 97(Q III).
    2. Fumiko Hayashi & Richard J. Sullivan & Stuart E. Weiner, 2006. "A guide to the ATM and debit card industry - 2006 update," Monograph, Federal Reserve Bank of Kansas City, number 2006agttaadci2, March.
    3. Richard J. Sullivan & Zhu Wang, 2005. "Internet banking: an exploration in technology diffusion and impact," Payments System Research Working Paper PSR WP 05-05, Federal Reserve Bank of Kansas City.
    4. Timothy H. Hannan & Robert M. Adams, 2011. "Consumer Switching Costs And Firm Pricing: Evidence From Bank Pricing Of Deposit Accounts," Journal of Industrial Economics, Wiley Blackwell, vol. 59(2), pages 296-320, June.
    5. Zhu Wang, 2012. "Debit card interchange fee regulation: some assessments and considerations," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 98(3Q), pages 159-182.
    6. Fumiko Hayashi, 2012. "The new debit card regulations: initial effects on networks and banks," Economic Review, Federal Reserve Bank of Kansas City, vol. 97(Q IV).
    7. Timothy H. Hannan, 2001. "Retail fees of depository institutions, 1994-99," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 87(Jan), pages 1-11, January.
    8. Ron Borzekowski & Elizabeth K. Kiser & Mark D. Manuszak & Robin A. Prager, 2009. "Interchange fees and payment card networks: economics, industry developments, and policy issues," Finance and Economics Discussion Series 2009-23, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Benjamin S. Kay & Mark D. Manuszak & Cindy M. Vojtech, 2014. "Bank Profitability and Debit Card Interchange Regulation: Bank Responses to the Durbin Amendment," Finance and Economics Discussion Series 2014-77, Board of Governors of the Federal Reserve System (U.S.).

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