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.