Banks ponder future of rewards for debit-card transactions.

Should debit-card issuers discontinue or scale back their rewards programs? Or, conversely, should they aggressively pursue fee-based debit rewards?

These are the questions that financial services companies are asking themselves in the wake of the settlement earlier this year of the lawsuit filed by retailers such as Wal-Mart against card companies Visa USA and MasterCard International.

The retailers had complained that the card companies had violated federal antitrust law by forcing the stores to accept all types of cards--both credit and debit--or none. Merchants preferred PIN-based debit transactions, since the retailers paid a lower fee for these services.

Under the terms of the settlement, banks will receive lower fees when a customer makes a signature-based debit transaction. Financial institutions now are looking for ways to make up the revenue shortfall. According to media reports, the Bank of America has anticipated a 1 percent loss in projected revenue earnings this year ($60 million in after-tax revenue) as a result of the lower signature-based debit fees.

Some banks already charge a fee ranging from 15 cents to 50 cents per transaction when customers use their personal identification number (PIN) for a debit transaction. Other banks are now considering adding a PIN fee.

Previously, some banks had built rewards programs around signature use of debit cards. Some of these banks are now considering either scaling back these rewards, or at least not adding new customers to the program.

Another option is the imposition of a monthly charge for use of the debit card, which would be waived if the customer made a minimum number of debit transactions each month.

Prior to the War-Mart settlement, relatively few banks offered any rewards in connection with their debit cards, according to a new survey from Synergistics Research Corp. A telephone poll of 1,003 consumers showed that only about 10 percent had received some kind of reward through debit-card use.

"The low current incidence of rewards associated with debit cards found in our survey shows that providers are at an opportune time to make a decision regarding their debit card rewards programs," says William H. McCracken, CEO of Synergistics. The survey results are available for purchase in a study entitled, "Enhancing the Debit Card Product Line." E-mail Synergistics at [e-mail].