USAA Bank has become the latest bank to end
debit card rewards following the implementation of the Dodd Frank

The bank said it is ending the rewards scheme
on 1 September in order to continue to offer free current accounts
and “other member-valued benefits”.

But the bank emphasised that it would not
begin adding extra charges and that the decision only affected
debit cards and not credit cards rewards.

In March, US banks claimed they would no
longer be able to issue cards and warned they would abolish free
accounts to make up for the loss of swipe-fee income.

Dodd Frank Act was passed in the US Senate in July 2010
and is
to slash the fees that banks charge merchants for card transactions
by 80%.

Although there is an exemption from the Act
for banks with assets of less than $10bn, some small banks and
credit unions argued that they would be disadvantaged if the Act
goes through, enabling merchants to favour cards with lower swipe

USAA Bank president David Bohne said:

“We carefully considered all options and
surveyed members when we began assessing the financial impact of
the provision.

“USAA’s survey found that [clients] favoured
free [accounts] and ATM fee refunds over debit card rewards. Based
on this feedback, we decided to stop the debit card rewards to
maintain the other benefits.”

USAA’s decision to drop its debit card rewards
schemes comes days after TCF Bank dropped its
lawsuit against the Fed


Debit interchange fees twice as much as initial

The Fed issued its
final rules
on debit card interchange fee standards at the
beginning of July.

Regulation II, part of the Dodd-Frank and
Consumer Protection Act, caps US debit interchange fees at $0.21 –
which is almost twice as much as the Federal Reserve Board had
initially proposed.

Banks with assets of less than $10bn are
exempt from the rule.

But in March, major US banks and credit unions formed an

alliance to push US consumers into lobbying against the
government’s proposed restrictions
to interchange fees under
the Dodd Frank Act.

The Electronic Payments Coalition has launched an aggressive
advertising campaign, implying that banks will eliminate debit
cards if the Act is passed and consumers continue to use their
cards for purchases.