Banks are rolling out new debit card fees. I never was a big fan of debit cards (and favor credit cards [1] instead), but I know many of you swear by debit cards, so let’s start brainstorming!
Beginning in 2012, Bank of America will charge $5 per month for debit card use. In addition, Chase and Wells Fargo are testing $3 per month fees in various locations. Will other banks follow their lead? Let’s explore the options and alternatives to debit card fees.
Update: Bank of America abandoned their plan to charge the debit card fee. If your bank is still charging a debit card fee, check out the ways to avoid the fees below.
Ways to Avoid Debit Card Fees
- Use cash. Just the other day Amanda discussed 6 reasons why you need to carry cash [2]. The new debit card fees just added a 7th reason! Use cash and avoid the fees.
- Use credit cards. Is it finally time to make the switch to a credit card? If you are going to do so, you might as well get a rewards credit card like the Chase Freedom card with a $200 sign up bonus right now, and no annual fee. Not only will you save the debit card fee, you’ll come out ahead with the cash back and sign up bonus. If you are worried about your ability to manage a credit card, treat it the exact same way you did your debit card, subtract the purchases from your checking account on the day you make the charge. If you’re really worried about it, you don’t have to wait for a statement, you can always transfer the payment from your checking to your credit card the same day your make your purchase.
- Write a check. I know, old school. But you can. For free.
- Use prepaid debit cards If you’re honest with yourself and you know you can’t manage a credit card, you could consider using prepaid American Express gift cards [3]. They’re prefunded with a set a amount and available online and in many grocery stores [4].
- Use an online bank. You can also check out on online bank. While you won’t have a bricks and mortar branch to visit, many of the online banks [5], like Ally and ING won’t charge you for using their debit cards.
- Don’t use the card. The rule is, if you don’t use it, you won’t be charged. You can still use the card to access the ATM and you don’t have to close your account or get rid of the card to avoid the fee.
- Take your banking elsewhere. If you are furious, like I know many people are based on the news right now, check out other banks. Now might be the perfect time to switch to a rewards checking account [6]. In addition, many local credit unions rarely charge the fees that banks do and will be happy to open an account for you. Our current bank, Schwab, has free checking, no fees, ATM reimbursements, and mobile check deposit. You may also want to check out Citi offering $400 [7] to open a new checking account.
Debit Card Fees
The reason for the new set of debit card fees is to offset the lower amount banks can charge retailers. The law now says the maximum fee is 21 cents, down from an average of 44 cents before the law went into effect.
What other debit card fee alternatives can you think of?