Update (Nov. 1, 2011): Bank of America has decided against charging this new debit card fee.By now, you’ve probably heard the news about the new debit card fees that some banks are starting to charge their customers.
Maybe you use one of those banks?
Bank of America is the most notable and they have decided to charge their customers $5 a month just for using the debit card at any place other than the ATM. This new fee will start up in 2012.
What’s Behind the Fee
On the surface this fee doesn’t make sense. Why should customers have to pay $5 a month just to access their money? And why would banks feel as if they can change the rules in the middle of the game like this?
Bank of America spokeswoman, Betty Riess, said this about her bank adding debit card fees,
“The economics of offering a debit card have changed with recent regulation…”
That’s a very diplomatic way to put it. Here’s what’s been going on behind the scenes, which led to these new fees:
The big banks and merchants (businesses) that take debit cards have been playing a big game of hot potato with swipe fees. Swipe fees are the fees that banks charge merchants for the privilege of taking the debit card as payment instead of cash. This fee used to be 0.45 per transaction. New government regulation aimed at helping the merchants, sets a cap on these fees at around 0.22.
The way the bank sees it, they’ve now lost 50% of their revenue from this source. Instead of taking it in stride, they do what any shareholder-pleasing corporation would do: find a way to replace that loss of income. Thus, the fee applied to their customers either in the form of a debit card monthly fee or in some other way.
What You Can Do About It
So, if you’re a debit card user at one of these banks, the hot potato is in your hands. You can either hold it and accept the new fee, or you can toss it right back to the bank by not using your debit card (use the ATM, checks, or your credit card responsibly instead), or by finding another bank that isn’t charging these fees.
Even though we still have a Bank of America checking account, and a new, but barely used Chase personal checking account, we should be able to avoid these new fees. Here’s how… We do all of our spending through our free online checking account debit card and our Chase Freedom credit card.
With the recent roll out of paper checks for our online checking account, we really have no more need for a brick and mortar bank. We’ll be closing our mostly deserted Bank of America account soon.
The online banks and credit unions aren’t reacting to this regulation. I’m not exactly sure why. But they won’t be applying a fee for debit card usage. Both online banks and credit unions are certainly a good alternative to the big banks.
What do you think about these new debit card fees? Will this change how you do your banking?
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