The Durbin amendment has sent another debit rewards program to the graveyard as USAA Federal Savings Bank will officially terminate its offering on Sept. 1.
The San Antonio institution, which serves U.S. military members and their families, made the announcement July 6, citing research the bank conducted that suggested its cardholders would rather forgo debit rewards than a free checking account and ATM-fee reimbursement.
USAA does not charge a monthly maintenance fee for its checking account, regardless of the balance. It also offers checks for free.
The announcement comes on the heels of the Federal Reserve Board's decision to cap debit interchange rates at an average of 24 cents, down from the current average of 44 cents but double the Fed's earlier proposed 12-cent cap. The new cap goes into effect Oct. 1.
USAA's decision to drop debit rewards was one the institution began considering when the Durbin amendment was introduced last year, according to a company representative. The institution recently surveyed over 700 members and the majority agreed they could live without rewards.
USAA operates only one branch, in San Antonio. It should come as no surprise its members value perks such as ATM-fee reimbursement over rewards, one analyst says.
"As a USAA member thinking about what they value, they're going to value free access to their money as opposed to debit card rewards," Patricia Hewitt, the director of the debit advisory service at Mercator Advisory Group in Maynard, Mass., says. "Debit card rewards aren't one of the primary components of a checking account's value proposition."
USAA said it "carefully considered all options and surveyed members when we began assessing the financial impact of the provision" David Bohne, USAA Bank's president, said in a statement.
"Based on this feedback, we decided to stop the debit card rewards to maintain the other benefits," he added.
USAA reaching out to its members on this issue is "just a microcosm of what's [currently] happening in the market," Hewitt says.
Consumers might be faced with a similar decision if issuers decide to keep debit rewards but add a fee for the service, Hewitt says. USAA's member-outreach initiative is an example "of the position consumers are going to be in as far as what they find valuable in their checking account relationships," she adds.
Consumers will be forced to make these kinds of value choices as more checking-account fees are introduced into the market, Hewitt says.
USAA members did not pay a fee to participate in the program. Cardholders chose between cash-back or perks such as airline rewards, gift cards and the ability to convert points into charitable donations. Points varied on which type of checking account the cardholder held.