The impact of debit card regulation on checking account fees

Starting in 2011, when new regulations capped the interchange fees paid to banks for debit card transactions, some news reports predicted banks might increase checking account fees. The cap reduced many banks' revenue and the concern was that they might offset their losses by charging more for checking accounts. Sullivan examines data from broad samples of banks and finds that many large banks raised fees—but among the thousands of smaller banks that had been exempted from the regulations, some raised fees while others lowered them. On net, consumer access to free checking actually increased. The author also explores data on factors that may have driven banks' decisionmaking, including banks' financial characteristics; aspects of the regional market in which they operate; and the degree of competition they face.