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The End Of Reward Checking Accounts?

Thursday, December 16, 2010 - 2:58 PM
To me it looks like the following rule changes will remove the profitability for banks for doing reward checking accounts--so they will eliminate them.  Any thoughts?

"

Visa Inc. and MasterCard Inc. plunged more than 12 percent in New York trading after the Federal Reserve Board proposed rules that may slash debit-card interchange fees by 90 percent.

The new rules, posted today by the Fed on its website, may aid retailers and cut profit for lenders who reaped about $15 billion from such charges last year. Terms outlined by the Fed include a plan with caps of 12 cents per transaction. The fees currently average about 1 percent.

The result could be an 80 percent to 90 percent drop in the fees that Visa and MasterCard pass on to banks, according to Tien-tsin Huang, an analyst at JPMorgan Chase & Co. Jason Kupferberg, an analyst at UBS AG, said investors had been expecting a 40 percent to 60 percent reduction."

http://www.bloomberg.com/news/2010-12-16/federal-reserve-moves-to-reduce-debit-card-fees-visa-mastercard-decline.html
3
PastTensePastTense8 posts since
Dec 16, 2010
Rep Points: 33
1. Thursday, December 16, 2010 - 3:33 PM
I just did a blog post on it. The new rules are only suppose to affect institutions with over $10 billion in assets. The vast majority of banks and credit unions that offer reward checking are under this size. However, CU Times thinks this still will be costly to credit unions. So it definitely adds to the head winds against reward checking accounts.
3
Ken TuminKen Tumin5,467 posts since
Nov 29, 2009
Rep Points: 124,996
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