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Consumers May Move To Smaller Banks To Cut Debt

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Consumers are switching to community banks to reap more debit card rewards. Due in part to recent legislation that removed or limited profitable revenue streams for many major lenders, consumers may soon be flocking to smaller banks and credit cards to save money.

Many major banks are set to roll out new fees on checking accounts and debit cards in the coming year, with some coming equipped with monthly maintenance and annual fees.

As a result, consumers who are worried about their current debt levels, or who simply want to cut their monthly spending may begin moving back to credit cards, The New York Daily News reports. However, while this may help avoid new fees, these cardholders risk extra debt in the form of high interest rates and harmful delinquencies.

Many other consumers will be inspired to move to smaller banks for their debit card needs, the news source says. This is because the recent sweeping interchange fee reforms only affect large lenders, while most credit unions and local financial institutions are exempt.

In 2010, many consumers decided to stop using credit cards, and many reported aversions to using the payment system during the holiday season. However, credit card issuers hope the changes will be enough to lure some back to once-popular purchasing option. 

Timely articles written by the Editors at DRC