Where to Turn in the Wake of Debit Card Fees [Personal Finance]:From Lifehacker:
Last week, Bank of America announced they'll start charging $5 per month for using debit cards, and they're not the only ones who do it. Here we'll take a look at which banks are hiking fees, how the fees work, and whether you might want to switch banking institutions.
Bank of America will be enacting this new fee at the start of the year because they report that they will lose almost $2 billion as a result of the Durbin amendment to the federal Dodd-Frank Wall Street Reform and Consumer Protection Act that went into effect October 1st. The amendment restricts how much a bank can charge a retailer when you pay with their cards. In the past, banks could charge up to 44 cents per swipe. The amendment cuts that by more than 50% to a maximum of 21 cents per swipe plus .05% of the purchase price. Sun Trust already charges a debit card use fee, while Wells Fargo and Chase are "testing" it out. Citigroup has indicated they have no plans to increase fees for using debit cards.
In Bank of America's case, this fee applies to their Basic account holders that make up the majority of their 38.7 million customers that carry a debit card. The fee does not apply to their Platinum or Premium customers. The fee works like this: If you use your card as a debit card, or for any other reason other than taking out cash from an ATM, you will be charged $5 per month whether you use it once or 20 times in that month.
Your Options
It's not terribly difficult to avoid the fee if you don't mind changing your habits.
- The simplest solution is not to use your debit card for purchases and only use it to take out cash at the ATM.
- Debit cards are a fairly new offering in the history of banking, so consumers can always go back to using checks, cash, and credit cards.
- Increasing your holdings with a particular bank is an option that could get you into a premium category where this fee is waived. If you have the means, and it is important enough for you to save that $5 per month for the privilege of using your debit card, then pad your coffers with your institution of choice.
- You also have the option of switching to a credit union or smaller town bank. Typically, these institutions have smaller, or no, fees because they are not driven as much by profit as the bigger banks.
What You Should Consider Before Switching to a New Bank
Switching to another banking institution can be a hassle. You'll need to consider the time it takes to set up a new direct deposit with your employer, change linked accounts (such as PayPal), and make sure automatic bill payments occur uninterrupted. Also, smaller banks/credit unions may be cheaper, but they don't always offer the convenience of larger banks. Smaller institutions generally do not have an ATM or branch in every town all over the country. Last, there is no guarantee that other banking institutions will not follow suit with charging these fees. Others already have, and more may follow, as the amendment will impact them as well. Only time will tell.
If you decide to make the change to a different banking institution, here is a guide from fivecentnickel.com to help you with that transition. If you just want to vent and let Bank of America know how you feel, sign this petition over at change.org.
Tell us how you plan to handle fee hikes by your banking institution in the comments below.
Photo by Lewisha Jones.
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