Banks are rolling out new debit card fees. I never was a big fan of debit cards (and favor credit cards 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.

Ways to Avoid Debit Card Fees

1. Use cash. Just the other day Amanda discussed 6 reasons why you need to carry cash. The new debit card fees just added a 7th reason! Use cash and avoid the fees.
2. 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.
3. Write a check. I know, old school. But you can. For free.
4. 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. They’re prefunded with a set a amount and available online and in many grocery stores.
5. 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, like Ally and ING won’t charge you for using their debit cards.
6. 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.
7. 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. 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 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?

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American Express is offering an easy sign-up bonus for 15,000 points and it’s this week’s Free Money Friday! The 15,000 points are worth $150 in gift cards.

How to Get Your $150 Sign Up Bonus

1. Sign up for the American Express Premier Rewards Gold Card.
2. Spend $1,000 within 3 months.
3. Receive 15,000 Membership Rewards bonus points.
4. Redeem points for $150 worth of gift cards.

American Express Terms and Conditions

• No annual fee for the first year, then $175/year.
• Points will be credited to your Membership Rewards account 6-8 weeks after you meet the spend requirement.
• Limit one offer per card account.

More on American Express Premier Rewards Gold Card

Travel Benefits. Use Pay with Points feature at American Express Travel site and fly any airline, anytime, anywhere. Also, enjoy special travel packages and upgrades to Gold Card destinations.

Earning Points. You can receive 3x points on airfare, 2x points on gas and groceries, and 1x points on everything else.

Redeeming Points. You can redeem your points for a number of different gift cards (Banana Republic, Amazon, and Macy’s) so this offer could give you a great head start for some holiday shopping.

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In the article 6 Reasons Why You Need to Carry Cash, I mentioned that only carrying around credit cards makes it a nuisance to make purchases from merchants who implement credit card minimum purchase requirements. In the comments section, multiple readers claimed that it is actually against the terms of service between credit card companies and merchants for merchants to institute minimum purchase requirements (per credit card merchant agreements). One reader, Eric, also was interested in finding out if any credit card company had pursued a case against a merchant for doing this. After doing some research, I found out some interesting information that I wanted to share with everyone.

Reasons for Instituting Minimum Purchase Requirements

The places where I have noticed minimum purchasing requirements are at local convenience stores, the cafeteria in the building that I work in, bakeries, etc. Merchants may decide to institute these for a few different reasons, such as to pass on the cost of credit card transactions to consumers (merchants have to pay hefty transaction fees to the credit card companies every time a consumer swipes a card), or to make more money from consumers who might not otherwise reach a $5 purchasing threshold. In my own experience, when I was famished in the past and looking for an afternoon snack (bag of Sunchips) in our cafeteria I’ve had to load up on candy bars, an iced tea, a banana, gum, and anything else necessary to meet the $5 credit card minimum charge — items I would not have purchased without that requirement.

Cases that Credit Card Companies Have Pursued

In an attempt to answer the Eric’s question, I spent a decent amount of time researching whether or not a credit card issuer has sued or otherwise slapped a merchant on the wrists for requiring a minimum transaction amount when using a credit card. I could not find anything (does anyone here know of any cases?).

However, as of July 2010, this no longer matters for most minimum purchase amounts.

New Law Makes Credit Card Minimum Legal

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which went into law in July 2010, there was a section that made minimum purchase requirements legal. The law states that merchants can now institute up to a $10 credit card minimum requirement, so long as they treat each card equally. A direct quote from the law states:

A payment card network shall not directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability (i) of any person to set a minimum dollar value for the acceptance by that person of credit cards…

Furthermore, the law allows the Federal Reserve to increase the minimum purchase requirements in the future.

It should be noted that the minimum purchases apply only to credit cards and does not apply to debit cards.

While I was surprised to not find any cases where credit card issuers have pursued penalties or warnings against merchants who instituted minimum purchasing requirements for consumers, it does not actually matter now because of the new law. That is, as long as the minimum amount is $10 or less. As a side note, this law came into effect last year, and I was surprised about this because I have not seen more companies institute minimum purchase amounts.

Have you seen an increase in the minimum purchase requirements? Will this influence your decision about whether or not to carry around cash only, credit cards only, or a mixture of both?

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Have you ever tried to put your utility bills on your credit card for some cash back only to realize that the utility company erases the benefit by charging you a fee?

If so, this week’s Free Money Friday is perfect for you. Discover is offering a new way to save money by offering an instant cash rebate of all applicable fees when you pay your utility bills on ChargeSmart!

How to Get ChargeSmart Utility Rebates

1. Sign up for ChargeSmart.
2. Select the utility company you want to pay.
3. Enter your Discover credit card info.
4. ChargeSmart will deliver your payment via electronic ACH transfer.
5. Discover will give you a rebate for any fees associated with your utility payment!

More on ChargeSmart

Fees. Depending on the biller (company you are paying), there is either a blended or flat fee associated with your transaction. The fee will be displayed before you proceed with your transaction.

Discover Rebate. This rebate works with all Discover branded credit or debit cards and will be in addition to any cashback program that your Discover card may already offer.

What Bills Can I Pay with ChargeSmart? You can use ChargeSmart to make payments towards your mortgage, auto loan, auto lease, education loan, or utility bill. You can even use ChargeSmart to pay bills to a company that doesn’t offer that option directly on their site.

Paying Your Mortgage. With ChargeSmart, the return of paying your mortgage with credit cards is back! Just make sure that your credit card cash rewards will be greater than the cost of the fees to make money on the deal.

Possible $10 Rebate on Other Payments

In addition to the utility rebate, we also found a few mentions that Chargesmart will give you $10 off all other payments (mortgage, auto, etc) which should help offset the fees and earn you more cash back from your credit card.

Discover Cards

If you don’t have a Discover card to use, here are some of our favorite Discover cards to use with Chargesmart:

• Discover More Card with 18 Month 0% Balance Transfer
• Discover Open Road Card with $150 Restaurant.com Gift Certificate
• Discover More Card

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Chase is back with a sign bonus for the Chase Sapphire card!

I’m excited that the credit cards are increasing sign up bonuses to try to get our business again, since it means more free money for all of us.

How to Get Your Sign Up Bonus

1. Open a new Chase Sapphire card.
2. Spend $3000 in the first 3 months.
3. Earn 25,000 bonus points – that’s $250 towards a flight or any other reward.
4. Points will post to your account in 6-8 weeks.

Chase Terms and Conditions

• Qualifying transactions for the Chase Sapphire sign up bonus include purchases, balance transfers, or any checks that are used to access your account, and excludes cash advances.
• This one-time bonus offer is for first time cardmembers with new accounts. Previous and existing cardmembers/accounts are not eligible.

More on Chase Sapphire

Cashing in Points. You can start cashing in your Chase Sapphire points for statement credits once you reach 2,000 points. After that you can redeem additional points in increments of 100 points for $1.

Statement Credits. You can apply statement credits to purchases made within 60 days of the redemption date and the statement credits will post within 5-7 business days of redemption.

More Points. In addition to the points for the sign up bonus, you’ll earn 1 point per dollar you spend and 2 points per dollar when you book travel through the card. There is no limit on the points you can earn.

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