What Everybody Ought to Know About New Debit Card Fees

Update (Nov. 1, 2011): Bank of America has decided against charging this new debit card fee.

Debit Card Fees

$5 a month to use this badboy from now on.

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?

Photo by MoneyBlogNewz

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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon. He created this website back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence. He uses Personal Capital to track his wealth. All the content on this blog is original and created or edited by PT.


  1. Marjorie Taylor says

    I bank with Regions and I got a letter this month letting me know about the fees I will be charged starting next month.

  2. Bret @ Hope to Prosper says

    I walked out of a B of A branch 28 years ago and am so glad I did. Their customer service was awful and their policies intolerable. This fee shows they only consider customers as a source of revenue, not as people who should be respected. If my bank (WF) tries this fee, I will be switching immediately and I have banked there for 28 years. I don’t see other banks following suit. I think they are waiting to see how many people leave B of A.

    • Philip Taylor says

      Actually Bret, as of now, Wells Fargo is testing their own fee of $3. So is Chase. Citibank is also recouping the cost of loss of revenue, but getting it from someplace else besides a fee on debit card use.

      • Bret @ Hope to Prosper says

        I believe the $3 fee is only for some unprofitable accounts. These are low balance acounts without direct deposit. But, I wouldn’t put it past Wells Fargo to ding more people if they can get away with it. I agree with the Senate that 22 cents is a fair swipe fee and 45 cents is exhorbitant.

        I am curious how many people will really switch to new banks by November 5th. If it’s millions of people, the banks will probably drop these fees. If it’s only a couple of thousand, they will probably take it as a green-light. After seeing the hit Netflix took with their high fees, it will be interesting to see what happens to B of A.

  3. Vince Thorne says

    Debit-card cohorts. you can put any amount of money on your credit card when you pay the bill and then charge the card. You can thus use your credit card as a debit card. You will have the discipline of a debit card by keeping to your budget and the benefits of a credit card such as cash-back.

  4. I think it’s crappy (pardon my French) of BofA to charge a new fee, but at $5, I would consider banking with them if my relationship was good. Thankfully, I’m at a small, local bank, and I don’t have to worry about the fees.

  5. It doesn’t bother me since I do not use a debit card. I think the message from the banks is clear pay the fee or use your credit card.

  6. Im not banking with bofa n wellsfargo

  7. You mentioned hot potato? Yes, I closed my account with BofA and dropped it like a hot potato when I heard that I will be charged when I use my money on other merchants and stores. I can’t understand why.

    • Philip Taylor says

      Just closed mine today as well. Wasn’t using it anyway, but it still felt good to send a small message.

  8. The heck with the banks, if you are using debit card anyway then why not just use a prepaid card(same thing). No fees and excepted everywhere a debit/credit card is!