Updated 11/1/11: Today, Bank of America announced it’s dropping its plans for the $5 monthly charge on debit card use. Following the lead of most of the other big banks in wake of the huge public outcry against them. While this is certainly good news for anyone with an account with them everything I stated in this post still stands. I still strongly recommend leaving if you bank at one of these places, if you decide to stay, I’d watch your statements carefully. The banks are desperate to recoup some of the lost money from transaction fees and its only a matter of time until they find another creative way to get it straight from their customers.
Earlier this month Bank of America announced they’ll be charging customers a $5 monthly fee for using their debit card to make purchases, and they’re not alone. JP Morgan Chase and Wells Fargo are implementing $3 fees although both those banks say they are just “testing” the idea thus far. The reason for the change, banks claim, is to make up the revenue being lost due to new regulation that caps the fee they can charge for every card swipe. The regulations cap the fee at 21 cents per transaction while banks used to charge 44 cents on average. Needless to say, consumers are rightly outraged. It doesn’t matter how often you use your debit card, or if you select “debit” or “credit” as the transaction type. Use your card once or 50 times to make a purchase and you’re getting hit for $5.
Really, what else should we expect from the big banks? It’s the same old way of doing business that led to so many people distrusting them in the first place. These fees only hurt the people who can least afford them, and just like with maintenance fees and overdraft fees it seems the banks are focusing on ripping these people off the most.
Truth be told, I rarely, if ever use my debit card. Even though my bank has no fees of any kind (yet.). I’d say 95% of all my spending takes place on my rewards credit cards. If you’re responsible and pay your credit card bills in full each month this can have several advantages:
1. You earn rewards, in the form of points, or cash back, which add up fast. I earn enough cash back on one of my rewards cards to completely cover my electric bill every month or two.
2. Your purchases are more secure & covered by MasterCard/Visa’s more powerful charge back abilities in the event of fraudulent/unauthorized charges on your card.
3. You get a free 21 day float on your money. Meaning you have more flexibility with your money because it’s not actually gone from your account until you pay the bill (in full!) each month.
While for those of us who are responsible with our money using credit cards is the way to go. I do worry that these fees will push those who are less responsible and who have poorer credit into using credit cards more. Credit cards can be great, but they’re also very dangerous if you start to carry a balance and accumulate those high interest payments each month.
So what can you do? Well, in my opinion anyone who is even half serious about managing their money should be with a credit union or a fee-free bank. Credit unions almost always have free checking, as well as many other advantages over big banks for their members (such as lower interest rates on auto and home loans). There are also many fee-free online banks which will offer refunds on ATM fees and sometimes even interest on your checking account. Big banks are for people who don’t know any better or just don’t care. So if you’re upset with your bank over the fees you’re being hit with, the best thing you can do is make your money talk. Take it somewhere else.
To find a credit union near you try: Find a Credit Union
If you’re looking for an online bank I recommend: