Checking is Free, Debit Cards are Not

by Mercator Advisory Group 0

SunTrust has announced the changes they are making to their basic checking account type, renaming it an “Everyday Checking” account. With direct deposit the account is free, but if the consumer uses their debit card for any transaction, including recurring transactions, they will pay a $5.00 monthly fee.

“The change by SunTrust Bank is an evident response to the debit card swipe fee rules that are slated to take effect on July 21. The rules will cap the amount that merchants pay to process each debit card transaction – expected to slash debit interchange fee revenues by 80%.

“It’s no secret that the banking industry is undergoing a transformation due to numerous factors,” said a SunTrust spokesperson. “We’ve developed these changes in a measured, thoughtful way taking into account feedback from our clients.”

Not all accounts will be assessed this card-usage fee. This suggests that the competitive environment at the lower end of the consumer market may be entering an evolutionary phase where consumers who do not qualify for free checking accounts will migrate to lower cost community banks, credit unions, or alternative products, like prepaid cards. This could leave the industry in a difficult quandary where consumer profitability pools shift across segments, leaving smaller FIs with less profitable accounts overall and where the more profitable accounts remain within the larger FI segment.

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