How to Avoid the New Debit Card Fees

Bank fees are on the increase again this week with Wells Fargo announcing they will start charging debit card customers a monthly $3 fee. Bank of America recently announced plans to charge $5 per month for customers that use debit cards for purchases and will make $2.3 Billion from the new fee next year.  Not to be left out, JP Morgan Chase announced a $3 fee earlier this year for their customers.  Banks are responding to the Federal Reserve's recent action that reduced the maximum bank take on each debit card transaction from 44 cents to 24 cents.

Most consumers will accept the new fees because of the hassle involved in moving an account to a new bank.  In response to Bank of America's announcement, Rep. Brad Miller, a Democrat from BofA's home state of North Carolina, plans to introduce legislation that would make it easy for consumers to switch banks.   In the mean time consumers have few options in dealing with the new fees.

What can I do to avoid the new debit card fees?

Switch to another bank – Many small community banks and credit unions still offer free checking and free debit cards however if you have ever moved a checking account you know this is a hassle.  This option can potentially involve a lot of work to contact and change the checking account number on all of your accounts. Most businesses have a website where you can update billing information instantly without worrying about missing a billing cycle.  Payroll direct deposits on the other hand can take up to two payroll cycles to change so there can be an issue with your paycheck being deposited in one account while bills are being paid out of another account.

Use Cash, Checks, or Credit Cards for Purchases – Think about all the places you use your debit card: the gas station, grocery store, doctor's office, the Mall, and  the list goes on. Using checks to make a purchase is inconvenient    That leaves you with credit cards as the only option left to avoid the monthly $3-$5 fee.  As long as you pay off the balance each month, a credit card is an option and may even earn you reward points on your purchases.  If you fail to payoff the balance monthly the fees and interest will probably surpass the debit card fee you were trying to avoid in the first place.

Do I have any other options?

Pay the fee.  I bank at Wells Fargo and will soon be paying the monthly $3 fee for using my debit card.  I'm not real thrilled about paying the fee but will pay it for now in order to avoid the hassle of opening a new account at another bank.

How about you?  Are you dumping your bank or are you going to pay the new fees?


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21 Responses to How to Avoid the New Debit Card Fees

  1. SB @ One Cent At A Time 10/16/2011 at 8:25 am #

    I only use debit card while withdrawing money from ATM. I will never pay any fees as silly as this. I already have a second checking account to bank with.

    • Paul 10/16/2011 at 12:24 pm #

      I’m with you on the fees SB. Is it really that time of the year already?

  2. World of Finance 10/15/2011 at 4:35 pm #

    I’m not worried about the debit card fees, because I never use it. I pay everything with my credit card and pay it off at the end of each month. This way I actually earn money from the cash back rewards program offered with my credit card. 🙂

    • Paul 10/16/2011 at 12:26 pm #

      I use a debit card so that I can download transactions from my bank into Quicken. I am looking into using a credit card for the reward points too!

  3. Jesse @ BP 10/13/2011 at 10:36 am #

    Banks will never win with this kind of tactic. Treat customers right and you will find wealth beyond what any bogus fee will create.

    • Paul 10/13/2011 at 10:39 am #

      I agree in theory however, I think most customers will keep their money at their current banks due to the hassle in closing and opening up a new account. Hopefully new legislation being considered will make it much easire for consumers to transfer accounts to new banks.

  4. Razorbacks92 10/13/2011 at 9:06 am #

    Cash is King! Credit Unions are the way to go. I have never had a problem banking with a small credit union. Using cash for most purchases, other than online of pay at the pump gas also keeps me solidly on budget each month.

  5. Shaun @ Smart Family Finance 10/13/2011 at 4:36 am #

    You could also avoid using a debit card. Most credit cards are still free if you pay off your balance and pay on time.

  6. Suba 10/11/2011 at 11:44 pm #

    Online checking and credit unions. We LOVE our Schwab investor checking, hopefully that won’t be going south. If it does, I will just move over to Ally bank. With all the online banks reimbursing the ATM fees, personally I see no reason to stick with the big banks.

    • Paul 10/12/2011 at 9:50 am #

      Lots of banks are no longer offering free checking however, most offer free checking when you have multiple accounts or carry a minimum balance. Have a good week Suba!

  7. Financial Manager 10/07/2011 at 7:38 am #

    I think I’ll stick with my debit card. As a best practice, I like to take cash out and use that for purchases during the week. If I run out of cash, I know I hit my weekly budget and need to wait until the next withdrawal to buy anything else. Additionally, the debit card is a good backup money source for an emergency…instead of having to rely on a credit card.

    • Paul 10/07/2011 at 7:41 am #

      I’m hanging on to my debit card as well. Can’t see giving up the convenience for $3 a month.

  8. Paul 10/06/2011 at 11:09 pm #

    I’m getting a little tired of the fees too but I don’t think I’ll be moving my accounts either.

  9. Untemplater 10/06/2011 at 8:09 pm #

    Augh I hate fees. I use several different banks and they all charge fees in one way or another. I don’t think I’ll close any of my accounts anytime soon but I will try to be smarter at avoiding fees. -Sydney

  10. Jeff @ Sustainable life blog 10/06/2011 at 1:39 pm #

    Currently, my debit card bank doesnt charge fees, but to me it wouldnt matter – I do all my spending on a credit card and then pay it off monthly when the balance arrives.

    • Paul 10/06/2011 at 11:05 pm #

      Good for you Jeff! By the way I read your Fincon 11 post, sounds like it was a great event!

  11. ImpulseSave 10/06/2011 at 10:04 am #

    Lucky for me, I still use a small, local bank. I have no debit card fees and they even repay me for fees from using other bank’s ATMs. Even though it is not as accessible as the national banks, that has never caused me a hassle.

    • Paul 10/06/2011 at 11:02 pm #

      Small banks will be using no-fee debit cards as a marketing tool to gain customers from the big banks. Not sure how many will leave over $3-$5 per month though.

  12. krantcents 10/05/2011 at 5:53 pm #

    I understand I do not have to pay a fee because I have a premium account. I don’t use a debit card because I accumulate frequent flier miles by using my travel card.

    • Paul 10/06/2011 at 11:00 pm #

      Nice! I don’t travel enough to take advantage of that so that is a nice little perk for you!


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