As you’ve probably heard by now, Bank of America announced that it will be charging its customers $5 a month to use a debit card. The response was swift and unequivocal–Yuck!
In some ways I don’t blame BofA for the move. When Senator Durbin introduced the “Durbin Amendment” into the Dodd-Frank financial reform bill that effectively capped fees large banks could charge retailers that accept their debit cards, everybody in the free world knew exactly what would happen. The big retailers got a windfall, and consumers got the shaft through higher fees. The only irony here is that Senator Durbin is a democrat purportedly looking after the little guy. You can probably guess what I think of the Durbin Amendment.
Regardless of whether capping debit card transaction fees is a good or bad move, it’s here to stay. And the question is how we can avoid paying the banking fees that have resulted. So we put together five ways to avoid debit card fees like the one Bank of America will levy beginning next year.
1. Find a large bank that doesn’t charge a debit card fee
Not all large banking institutions have followed Bank of America’s move to charge for debit card use. In the end, they may all follow suit. But for example, I bank at Citi and the Citi checking account still offers a free debit card. USAA is another large bank that hasn’t tacked on a debit card fee, yet.
2. Switch to a community bank or credit union
The Durbin Amendment only affects large financial institutions. Banks with less than $10 billion in assets are not subject to the cap on debit card transaction fees. As a result, community banks and credit unions likely will continue to offer free debit cards. The only drawback with a small bank is that their ATM networks tend to be a lot smaller. As a result, you could end up paying ATM fees.
3. Use a credit card instead of a debit card
There are no limits on the interchange fees credit cards can charge retailers that accept their cards. As a result, there are still many no annual fee cards available. And many of these cards offer rewards ranging from cash back to free travel.
4. Go back to writing checks
I don’t expect most people to take this route, but you can always return to the days of writing checks. I actually get annoyed when I’m in line at the grocery store and the person in front of me is writing a check. They always seem to spend a good 5 minutes carefully writing out the check and recording the transaction in their check register. But if you can avoid bank fees by using checks, it’s an option to consider.
5. Switch to a prepaid credit card
Like credit cards, prepaid credit cards also escaped the clutches of the Durbin Amendment. As a result, you can still find free prepaid credit cards, but you need to understand the terms of the card. The best prepaid credit cards charge no transactions fees, no sign-up fees, and no monthly fees if you use direct deposit. Those are the cards you want if you’re looking to replace a bank debit card to avoid the fees.
Photo Credit: FLC