The Durbin amendment has sent another debit rewards program to the graveyard as USAA Federal Savings Bank will officially axe its offering on Sept. 1.
The San Antonio-based 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 regardless of a checking account’s balance. Checks also are free.
The announcement comes on the heels of the Federal Reserve Board’s decision to cap debit interchange rates at 26 cents from a proposed 12 cents. The 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 spokesperson. 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 observes.
“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, tells PaymentsSource in an interview. “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 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.
Current cardholders may redeem points they previously earned from using their debit cards after Sept. 1. USAA’s credit card rewards programs remains in tact.
The institution joins JPMorgan Chase & Co., Wells Fargo & Co., Regions, SunTrust Banks Inc. and U.S. Bancorp on the list of banks that have either eliminated or changed their debit rewards programs. At least one institution, Regions, told PaymentsSource sister publication American Banker it would reevaluate its program once the final interchange cap had been decided (
Regions announced in March that it was ending enrollments of new customers into its Relationship Rewards program, which allows participants to earn points on signature-based debit card transactions and other activities.
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