Wells Fargo: No more debit card rewards

August 22, 2011: 12:51 PM ET

NEW YORK (CNNMoney) -- After ending its debit rewards program for new customers earlier this year, Wells Fargo is now scrapping the program for existing customers as well.

Beginning in October, customers who are already enrolled in the issuer's debit card rewards program will no longer receive points for making debit card transactions.

In most debit rewards programs, points are awarded to customers for actions like spending, carrying high balances and making minimum deposits. Customers can then redeem the points they collect for cash or gift cards or even electronics.

Wells Fargo (WFC, Fortune 500) customers currently receive a point for every $4 they spend using their debit card, and up to 16 points for every $1 spent online at select retailers. In exchange, the bank charges a $12 annual fee. Once the rewards program ends, customers will no longer be charged the annual fee, and they will still have access to points they have earned.

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Earlier this year, the issuer ended its debit rewards program for new customers only, while customers who already had accounts were able to continue receiving rewards.

But this summer, the Federal Reserve implemented a cap on the fees banks can charge retailers every time customers swipe their debit cards. While banks used to charge an average fee of 44 cents, now they can only charge a maximum fee of 21 cents. This is expected to cost the banking industry billions of dollars.

Wells Fargo's move to include existing customers in the termination of its debit rewards program is a way to recoup lost revenue.

"We made this decision due to new regulations that limit the amount of money merchants pay financial institutions for processing debit card transactions," a Wells Fargo spokeswoman said. "The new cap doesn't cover all the costs associated with offering debit cards, including processing, administration and fraud."

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Banks like JPMorgan Chase (JPM, Fortune 500) and SunTrust (STI, Fortune 500) already eliminated debit rewards programs for both new and existing customers this year.

And debit rewards programs aren't the only debit-related services in danger. Before the cap on interchange fees went into effect in June, Chase threatened to limit debit card transactions to as little as $50.

Last week, Wells Fargo said it plans to begin testing a $3 monthly fee in Georgia, New Mexico, Nevada, Oregon and Washington for customers who use their debit card for purchases.

At the end of last year, JPMorgan Chase announced a similar test, in which it charged customers in northern Wisconsin a $3 fee for using their debit cards. The tests are still underway, a Chase spokesman said last week. To top of page

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