How To Avoid Debit Card Fees

avoid debit card fees

New legislation that took effect on October 1st means that banks can no longer collect exorbitant fees from merchants whenever you swipe your debit card. What does this mean for you? Your bank will now likely switch to collecting those fees from you, the customer. Several banks, including Bank of America, SunTrust, Chase, and Wells Fargo have already implemented debit card fees or are testing them in select markets. Some are charging as much as $5 per month. That works out to $60 per year for the privilege of swiping that plastic card.

Some banks will charge the fee only if you use the card, while others will charge it simply for possession of a debit card, whether you use it or not. Whether you conduct the transaction as debit or credit doesn’t matter, either, so you can’t just run the transaction as credit and hope to dodge the fee. After years of getting us hooked on the convenience of debit cards, the banks are now using that addiction against us.

I don’t know about you, but I don’t like it when banks charge me to use my own money. I resent checking fees and have switched banks several times to avoid them. While my bank hasn’t gone to the debit card fee model yet they have made some noise that they may have to, eventually. When that day comes, I’ll do everything I can to avoid it. If your bank is levying a fee for debit card use and you don’t want to pay it, here are some ideas for avoiding it.

Go back to cash

Years ago, people actually carried cash for purchases. It is possible to go back to that, although it does require a little more planning on your part (which can be good for budgeting purposes). Most banks are not charging for an ATM-only card. Give them back your debit card and ask for an ATM card. Withdraw whatever amount of cash you need to get you through a few days at a time. The more you do this, the better you’ll become at judging how much money you need to get you through a week. (Just make sure you use your banks’ ATM’s and not those of competitors. Otherwise, you’ll end up paying the fees you are trying to avoid.)

Cash isn’t as convenient as a debit card and it does require a bit of management, but plenty of people use it. The good news is that it can make overspending harder because if you’re out of cash you have to get more, giving you time to think about your purchases (thus why so many financial gurus recommend going to cash only if you’re trying to get out of debt).

Use credit cards

If you can use credit cards responsibly, this is a convenient alternative to debit cards. Choose a card with no annual fee and that offers rewards you can use. Most banks aren’t (yet) charging annual fees for credit cards, although there are some that do. If you use a credit card instead of a debit card, you still get the ease of swiping at the register and you’ll earn some rewards in return. Just make sure you can pay for everything at the end of the month because credit card interest will make that debit card fee seem very small in comparison.

Look into credit unions or local banks

There are some banks that aren’t charging debit card fees. Typically these are credit unions and smaller community banks. Most of the mega-banks are or will soon be charging fees. Vote with your money and take your business elsewhere. There are so many credit unions these days that you can likely find one for you and most communities have at least one local or regional bank.

Meet any requirements you can to avoid the fee

If your bank offers a way to dodge the fee, such as by maintaining a minimum balance or using direct deposit, do it if you can. If you want to stay with the bank and not have to look elsewhere, this may be your best option. It might be a pain to amass the required balance or shift direct deposit from one institution to another, but it will be worth it to save on fees.

Go back to checks

Yes, checks are a pain compared to debit cards. It’s no fun to stand in line at the store and write a check when swiping is so much easier. However, if checking from your bank is free, it may be your best bet. Some banks still offer free checking yet charge the debit card fee. Know your banks’ policies and make your choice accordingly.

Debit card fees are on the rise and if you want to avoid them you’re going to have to take action on your own. It may mean going to some payment methods that are less convenient than you’re used to, but you can adapt to the changes. Of course, if the convenience is worth the fee to you then by all means pay the fee. Only you can judge the worth of the service for yourself. For me, it’s not worth it. If the day comes when my bank starts charging, I’ll hand them back that debit card and get an ATM-only card. I have no problem with cash.

(Photo courtesy of Elvert Barnes)

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13 Responses to How To Avoid Debit Card Fees

  1. I give this article five stars. It’s a no-nonsense good-advice article. If my little bank (I quit the big one months and months ago) charges debit card fees per month, I will give back my debit card(s). I have been happy to deal with cash (the bank doesn’t charge to go get cash from the teller) and it’s certainly more directly associated with your bank balance so you don’t spend more than you have. This is a matter of KISS (keep it simple, son)

  2. Greg says:

    Good advice. Unfortunately, for checks, the banks charge exorbitant amounts of money for the blank checks too.

    I agree though… Nothing bothers me more than the bank charging you to spend your own money. Maybe they should start LENDING again to get their money from interest. That pretty much is the only legit way the bank should earn money.

    And even that is a bit suspect if you ask me.

  3. Craig says:

    The primary problem with cash is the lack of security..i.e.,robbery.

  4. KB says:

    I cannot stand these fees coming up. I guess the idea behind the legislation was that retailers would then pass this merchant fee savings along to the customers in the form of lower prices? HA! Right. It was obvious when this legislation passed, that instead of a merchant bearing the cost of ATM/debit and spreading that out through a tiny increase in prices to everyone, those of us using the cards will now pay no matter what. The consumer always loses out to the need for increased profit margins… that will not change in the future.

  5. Marty Goldstein says:

    What a shame that the US government had to meddle so deeply into commerce that it has now cost money and resources. The US government Dodd-Frank bill has disrupted and meddled by regulating a swipe fee. Now, as all regulation does, prices go up, competition is stifled, innovation is stopped, and American citizens must work, adjust, go back “20 steps” for the good of politics and government. How tragic that the US Government is so deeply meddling.

  6. Brian says:

    What legislation. Your congress have passed another bill for corporate america. The walmart, targets, krogers, macys all will make more money on their p&l while working Americans will be picking up the tab again. Well at least gas prices will go down next year simply because it is an election year…… but rest assure it will go back up.

  7. devin says:

    The only way you pick up the tab is if you are too lazy to move accounts to one that is in your interest. I don’t understand why everyone is complaining — it is great motivation to move bank accounts which you should have already done. Find a local credit union. I love mine!

  8. Natasha says:

    An ATM only card is a great idea, but it’s not always feasible to go back to an ATM-only card. For what it’s worth.

    My partner & I have done our best to carry ATM only cards for years, for security purposes. Of the banks we’ve dealt with, most have been willing to do this for us, but one or two simply do not issue those cards. It’s obnoxious.

  9. “The consumer always loses out to the need for increased profit margins……”

    Not if they have a choice in the matter. Banks have to compete for consumer deposits, and retailers have to compete for consumer dollars. All else being equal, places with lower fees and prices will get more business.

    When the bank fees were passed on to merchants, fee competition was minimal. Retailers had to take whatever charges each bank levied, or not take cards at all. (They couldn’t pick and choose between which banks to take cards from.)

    Now that banks can’t get as much out of the merchants, any fees they want to get from their depositors are pushed out into the open. Those who find it worth paying $5 a month to stay at Bank of America or a megabank with similar fees can. Those who would rather pay less can switch to a competitor that treats them better. It’ll probably be a smaller bank or credit union, but there are plenty of those around in most areas if you look.

  10. barter411 says:

    That settles it, I’m switching to Bitcoins. (just kidding).

    I thought retailers liked debit card transactions better than credit. They are always trying to steer me towards a debit transaction. My credit union begins to charge a fee after some token number of free debit transactions per month. I can avoid that by always choosing “credit”. The day they begin charging a monthly fee, I don’t know what I will do. With three checking accounts, that will be costly.

  11. bobebob says:

    Retailers like debit cards because the fees aren’t as high for them. So retailers love debit cards. But your bank would rather you use your credit cards so they can charge the huge fees.
    To avoid the fees for Bank of America you have to be an “Advantage” account holder. Then the fees won’t apply (I checked when I heard about the fees). To be an Advantage Account holder without fees, you must: Maintain $10,000 in combined balances across your checking, savings, and CD accounts or
    Maintain $15,000 in combined total assets across your linked Merrill Lynch investment accounts or A Bank of America mortgage balance of any amount or maintain a $15,000 balance in a loan or line of credit.
    They are slated to start sometime early next year. But since they hold my mortgage for the next 15 years. I don’t have to worry about these BS fees.

  12. I never even received a letter from Regions telling me about the $4 fee they started charging. After hearing about it, my friend and I did some searching and found that First Security and Liberty Bank of Arkansas aren’t charging and have free checking.

  13. dalson says:

    Cryptocurrencies like Bitcoin will be the future of payment.

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