USAA Ends Debit Card Rewards on September 1, 2011

USAA Bank has long offered some of the best checking and savings accounts around. This is because, in large part, the bank returned the majority of the money it collected from merchants to its members in the form of benefits, such as free checking, ATM fee refunds and debit rewards, according to the bank’s website. However, the new Federal Reserve regulations that will take affect October 1, 2011 affect the amount of debit card interchange fees. Consequently, this will reduce the revenue banks receive from merchants for debit card transactions.

Chances are, many other large banks will follow suit due to the regulations. The regulation caps the debit card interchange fees that retailers pay, but it exempts financial institutions with assets under $10 billion. Since USAA Bank has $48 billion in assets, this regulation will directly affect them, as well as many other banks.

As of September 1^st, your USAA debit card will no longer earn rewards, but members who have earned rewards through one of USAA's debit card rewards programs in the past can redeem the rewards or receive a cash payout later in the year. The good news is that, unlike several other banks, USAA is not making any other changes to customers’ accounts. The bank is not adding fees or eliminating other benefits, including free checking and ATM fee refunds. Credit cards are not affected by this regulation, so USAA credit card rewards will remain unchanged.

Although customers may be disappointed in this change, USAA remains one of the best free checking accounts around. USAA’s free checking account allows unlimited free ATM use, no matter what ATM you use. If another bank charges you an ATM fee, USAA refunds the charge. This is limited to the first 10 ATM withdrawals per month and USAA will refund up to $15 on other banks’ ATM fees each month. They also offer free overdraft protection (they will automatically transfer the needed funds from your savings account or a credit card for free), they give you free checks, free online bill pay, they have no monthly service fees regardless of your checking account balance, and you get a free rewards debit card (PIN-based transactions are excluded). You also earn 0.10% APY interest on your checking account.

For the best information on checking accounts, click here.