pile of cash - bank fees increaseYou might not think you have a lot in common with the largest banks. But in some ways you do, which is part of the reason why individual checking account holders and debit card users can expect to see their bank fees increase this year.

First, some history. Over the last couple of years, as the savings account interest rates at many leading banks have moved into the not-at-all-appealing category of slim-to-none, a new sort of bank account made headway: the high-interest rate checking account. These accounts, offered by smaller community banks and credit unions, were distinctly different.They sported interest rates of 3%, sometimes even 4%. They had maximum deposit caps of typically $25,000 to $50,000 and no minimum deposit requirements (these are not for millionaires looking to stash their nest eggs). And in order to keep earnings flowing, they required account holders to receive their statements online, make at least one direct deposit or automatic payment monthly and make 10 debit card transactions a month. The latter, explains Gabe Krajicek, CEO of checkingfinder.com, was responsible for a significant chunk of the profitability of these accounts.

"About 18% of the profit of that account is related to interchange [fees]," he says. "There are a lot of other things going on. The requirements of these accounts appeal to people who are more self-service in nature." That makes the accounts cheaper to operate. And the accounts are doing well. There are about 700 institutions nationwide offering high-interest rate checking, Krajicek says, and they are opening accounts at a rate of one per minute.

Starting July 1, 2011, however, things in the debit card world are going to change. That's the day a ceiling on interchange fees goes into effect. What will it do to your high-rate checking account? At first, very little.

The 12-cent per swipe cap on interchange fees will only be imposed on institutions of more than $10 billion in size. Most of the banks and credit unions offering high rate checking aren't that big. That means they can continue to make their swipe fees on debit and continue to offer the accounts.

In January 2013, however, the situation becomes a little dicier. That's when a portion of the Durbin Amendment requiring two unaffiliated networks on each debit card kicks in. That could force swipe fees -- even in the smaller bank arena -- into a price war, which would benefit the merchants but not the banks. If it takes a big enough bite out of debit card profitability these high-interest rate checking accounts could be in peril.

It's a similar situation to the one big banks -- with more than $10 billion in size -- find themselves in today as they prepare for the July 1 change. The conclusion industry experts like consultant Robert Hammer have come to is that more fees are headed our way, particularly on the checking accounts to which those debit cards are attached.

It's not, however, that free checking will go away entirely. Or that there will be one across-the-board fee. "The industry doesn't have a universal pricing committee," he says. "Jamie Dimon doesn't sit down with Ken Chenault and others and decide this is what we're going to do." He expects fees of $10 to $35 with various outs for maintaining balances, conducting business online, and keeping deposits coming. "But those fees might not be charged in all cases," he says. "And you might see a six-month to year hiatus before they kick in."

So what's a consumer to do?
  • Consolidate. The more banks rely on balance requirements for revenue, the more important it becomes to hit those marks. The easiest way to do that is to move more of your money to one or two institutions rather than a handful.
  • Read your Mail. If you've never paid attention to the mail you get from your bank, it's time to start. Look, in particular, for the words: Terms, Conditions and Disclosure, says Hammer. That's a sign something's up.
  • Understand the Value Proposition. If you don't like your deal, go out and look for a better one. Just understand the trade you're making. Swapping to a bank that has free checking with no minimum may save you $10 a month, which is great, unless it ends up costing you $15 in ATM fees.

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