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Why I Am Switching Banks

Nancy Patterson October 5, 2011 Easy Street 23 Comments on Why I Am Switching Banks

When is the last time you went through your wallet and cleaned it out? It’s usually a task only done once a year (or if you’re like me once every few years. Oops!) When I clean out my wallet I am usually going through the side pockets throwing away old receipts, gift cards that are out of money, business cards I’ve picked up along the way, old appointment cards and such.

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This time though I’ll also be throwing out my debit card. Bank of America recently announced it will begin charging its customers $5 a month, any month that the customer uses their debit card to make purchases. This fee will be on top of any monthly service fees that apply.

Bank of America isn’t the only one to hit consumers with new fees. Several other large banks have already begun charging customers to use their debit cards. Wells Fargo and Chase are testing a $3 monthly fee in some states. SunTrust has added a $5 monthly fee on its Everyday Checking and Student Checking accounts, and Regions Bank has added a $4 monthly fee on some checking accounts. In all of these cases, the banks are only charging the extra monthly fee if the customer makes debit card purchases during the month.

Banks are blaming lawmakers for enacting the new debit card interchange fee regulation that took affect October 1st. Consumers may give little thought to the interchange fee charged every time they swipe their debit card, but the fee had been taking a significant bite out of a retailer’s profit for certain transactions. Before the recent legislation, the interchange fee averaged 44 cents per transaction. Now, the reduced fee will be 21 cents plus an extra 0.05% of the transaction price to cover fraud protection costs. That means the maximum fee on the average debit transaction of $38 will be about 24 cents, compared with 44 cents previously. The Fed’s rules are part of the 2010 Dodd-Frank financial overhaul law, and the changes only apply to debit cards, not credit cards.

Now that big banks are charging for debit card usage this will essentially eliminate all debit card reward programs. Programs like Bank of America’s Keep The Change program will probably be phased out rather quickly. Credit cards will go back to being the better fit for most consumers. Consumers can still benefit from credit card reward programs. Most credit cards are offering 1-3% cash back on everyday purchases like gas and groceries.

Another benefit of credit cards is that they are inherently safer to use. When debit cards are stolen, consumers risk losing everything in their checking account if they don’t report the theft before the card is used. With credit cards you don’t have to worry about that. As long as consumers pay off their balance each month to avoid expensive interest charges and fees, credit cards will remain a great way to avoid debit cards and their fees.

Since the credit crisis a few years back, credit card companies have been a lot stricter in who they allow to sign up for their cards. You need to have good credit, not something everyone inherently has. For those people pre-paid cards might be the answer. Pre-paid cards work like debit cards. Spending is limited to how much consumers load onto the cards each month. Now most pre-paid cards charge $10-15 in set up fees and monthly service charges of $5-10, but the new American Express prepaid card skips the fees most others charge.  It also offers a few perks more often found on credit cards, like roadside assistance and theft protection on purchases. Without the fees, this card is a great alternative for debit cards. It eliminates most of the differences between the two, save for the low-rent reputation pre-paid cards have. Maybe that will change now.

If you don’t see yourself using a pre-paid card or credit cards more, then go back to using cash. With cash you never have to worry about fees. More often than not paying in cash gets you discounts. Gas stations, restaurants, doctors’ offices, and jewelry stores are the most common merchants that give discounts when paying in cash. Of course, if it’s stolen there is no way to recover it. Consumers that prefer to pay for everything in cash should still maintain checking accounts. At this time it’s still possible to find free checking and ATM withdrawals, but we’ll see how long that lasts.

For anyone who still really wants a debit card, smaller banks and credit unions may be the best alternatives. Banks and credit unions with under $10 billion in assets are exempt from fee caps in this new debit card regulation. And thankfully, the vast majority of credit unions are exempt from the cap (only three credit unions have assets over $10 billion, Navy FCU, State Employees’ CU and Pentagon FCU). Most credit unions offer free, interest-bearing or even rewards checking, because as small institutions they’re exempt from the Durbin Amendment fee cap. It’s also worth looking into online banks like ING, PerkStreet, and Sovereign Bank which all still offer debit card reward programs.

Readers, would you be willing to pay $5 a month ($60 a year) for the convenience of paying with your debit card? Leave me your thoughts in the comments section.

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Keeping Money in Your Pocket,

Nancy Patterson


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23 Comments

  1. Marsha October 5, 2011 at 6:01 pm

    Refuse to pay $5 for debit card use. Can write checks again and tie up line. Use credit card sparingly. Since hope to move next year not ready to pull everything from B of A but very tempting.

  2. Chriss October 5, 2011 at 6:04 pm

    The banks are lieing. These are banks that took the $700,Billion bail out. They should all pay it back. They are making money on foreclosures which are making our homes drop in value. They are selling them a third of the loans because they write them off, and get paid up to 70% of the loan amount. Thats how BOA made 4.4 Billion and does not have to pay taxes on it.

  3. Timothy May October 5, 2011 at 6:06 pm

    About two years ago, my bank (WF) down-rated my account from “Gold” to “Platinum”. The “Gold” accounts went away. With that demise went many of my (allegedly) free services, which were not free because I paid for them with a monthly fee, which I was glad to pay considering what I received in return. Now, the “Platinum” account was supposed to be(allegedly) free but what WF did, according to one of their bankers, is remove $10 each month without my notice and then put it back. Now, with Dodd-Frank, I must pay that $10 up front (to get what, I don’t know, and who knows if they aren’t still taking it out the back door)) or “invest” (their lingo) in a savings account of at lest $25/month (but, oh, I can take the money out one business day after depositing it) or I can go with Direct Deposit. All this to keep my checking account “free”. What they are doing with my money before “allowing” me to have at it would probably become an overnight best-seller, you know, the “One business day after deposit” rule. At the same time WF and many banks are now charging new fees for many items that were once paid for once/month with one fee. Now we pay and pay and pay for each individual service. Rotgut. According to my math, WF is now going to make an addition $12M/month. Blame greedy investors and stockholders who have played right into the hands of the pols in D.C., who have bowed to the political “pressure” put on them by weak-kneed investors who are suffering because of financial stupidity and power greed by the pols, who have deliberately destabllized the entire system for their own benefit. Forgive me for being frank, I do so wish the CEOs of these outfits would quit piddling in their pants every time the markets take a slight dip or correction bcause they know the stock holders will be all over them. But with Obama paying their bonuses, they are certain to stay on his path.

  4. Lee K October 5, 2011 at 6:26 pm

    No.

  5. Bill Silcox October 5, 2011 at 6:35 pm

    Yes I’ll Continue to use my debit card. Fees are, for better or worse, are a fact of life and it is much simpler for me to stick to my budget using a debit card. A $5.00 fee, at least to me, is a small price to pay for the convenience.

  6. Dan October 5, 2011 at 7:12 pm

    All the more reason that the government needs to stay out of our lives. Don’t have a debit card and will never have one, use my credit card and pay it off every month. Have not used banks except a savings account, always use a credit union, local CU’s are the best.

  7. Milton Brown October 5, 2011 at 7:25 pm

    Heck no I won’t pay an extra $5.00 fee to use my own hard earned money. Lest we forget, the business model of the banks was to use our money (checking and savings) to make loans and make money off of the interest. For the privilege of using our money they paid us a small interest.
    They are “losing” revenue because they are not lending money to anyone, good credit or bad. This is a knee jerk reaction to their own greed and irresponsibility that has help cause this economic down turn. Fortunately, my bank, BB&T and has not joined this runaway bandwagon but when they do I will go back to cash and keep my money buried in a mason jar before I give these users another red cent.

  8. Matthew Rensen October 5, 2011 at 7:33 pm

    We can blame congress more in point we can blame Democrats for meddling with free markets. Thank you Frank, Dodd, Durban and BO.

  9. Mark October 5, 2011 at 7:37 pm

    Frankly, I won’t do business with B of A because of their history of abuses, most notably their unethical foreclosure practices of late. So their fees are a non-issue for me. They and their ilk may experience some backdoor justice tho’ with their attempt at higher fees. They’re biting the hand that feeds them and if they annoy enough people, who in turn move their accounts to smaller banks and credit unions, they may well see even greater drops in revenue than they are currently experiencing. And the smaller local banking establishments could very well see exponential growth in their customer base and revenues…as long as they keep a lid on their fees. All of which may well be a good thing. A little redistribution of money and dilution of power makes for better competition, which is good for us, the consumer and ultimately good for the banking industry in general.

  10. Sharon H. October 5, 2011 at 8:02 pm

    Since I’ve had far more dealings with BofA and others like it, I have not had an account there for years nor do I intend to. I am fortunate that I can utilize the services of USAA and not only do I get free ATM (all charges automatically refunded each month) but I also get interest on the checking accounts. Not fond of Chase either, since their ATM fees have just jumped a bunch.

  11. Philip October 5, 2011 at 8:17 pm

    Here in UK credit cards are charged, debit cards are not. Given that we (the tax payer) own most of the banks, I don’t see that changing without a riot…..or perhaps not, as we are daft enough to be paying just under $10 yes that’s ten bucks a gallon for petrol/diesel.

  12. Neil October 5, 2011 at 9:10 pm

    If WF in Colorado starts sticking me with a debit card fee, I’ll go back to writing checks for everything. I strongly suspect that I won’t be the only one. I remember clearly how WF and all the banks pushed us several years ago to use debit cards for everything and stop writing paper checks. So the debit cards must have saved them money. Also with my 19-year-old checking account, I still get free (bank supplied) checks! So I’ll put up with the check writing hassle.

  13. Bruce October 6, 2011 at 12:22 am

    I have been with WF for over 28 years and if they charge for the debit card, i will move all my money out. my girlfriend has a debit card and her bank pays her 3% apr on her checking account if she uses debit card 12 times/month. Banks are a bunch of greedy SOB’s. Just wait til we all start writing checks again and clog the paper system!!

  14. k wiley October 6, 2011 at 1:36 am

    A couple of years ago I switched most of my liquid cash out of the mainline banking system and put it into an account with the local racetrack
    Now here is the rub
    1 Safety – the account is guaranteed by the government
    2 Anonymity – As long as I have my account card with my assigned anonymous ID I can withdraw and deposit cash

    3 No Fees- my account isn’t charged a penny to operate
    4 free checking, 0 if I want to pay a bill with a check I simply tell the track the name of the payee and the amount and they will draw a check payable to who i want -no fees and the check is drawn on the government agency

    Isn’t it time you told your mainline banker adios and let them nickle and dime someone else By the way you can even enjoy a day at the races and lunch to boot what banker has ever provided that kind of service
    Yes but you could lose money
    right but then again you could make money

    Put your money in a bank account and guaranteed you will lose your money due to account fees inflation and taxes and crummy investment advice
    cheers

  15. Mary L. October 6, 2011 at 2:06 am

    Why anybody would need a debit card is beyond me, we have checks, cash and credit cards, why PAY to have yet another card? My suggestion is to learn to manage your finances, yes, it CAN be done. I am not rich, never have been but no matter how little or how much money you have. you live on what you have and don’t buy a lot of things you do not need. If you want things in your life to change, change the things in your life…that includes handling money.

  16. sportsdealer October 6, 2011 at 2:21 am

    As a retail merchant I am tired of paying ridiculous fees for credit/debit card usage. It costs me over $6,000 a year for these fees. If I was the king of the world I would make it a law that all bank fees would be paid by the bank of the user. If you want the convenience of using a debit card you should be willing to pay the price. Please carry cash and everyone will come out ahead. Prices will lower because overhead decreases. Then the people who pay cash won’t have to pay extra because of people who use cards. My business used to be 25% checks, 25% cards, and 50% cash. Now it is 75% cards, 2% checks, 23% cash. That’s a huge change on $400,000 annual sales. Why do I have to pay for the banks bad debts?

  17. DEBRA BURNETT October 6, 2011 at 6:46 am

    IT IS BAD ENOUGH OUT THERE ON OUR SENIOR’S WITHOUT ADDING MORE BURDEN TO OUR POCKETBOOK! FIRST BB&T DREW ME IN WITH A TOTALLY FREE CHECKING ACCOUNT , NOW ALL THE SUDDEN AFTER 8 YEARS I GET CHARGED $10 A MONTH BEFORE I EVEN USE MY DEBIT CARD. . WELL THIS IS IT FOR ME , I THINK I’LL GO BACK TO ALL CASH! WHO CAN AFFORD ALL THIS , NOT ME !!!

  18. baldmurph October 6, 2011 at 8:27 am

    You look at your options and you makes your choices. I pay $6/month for an access card. It is labelled CHECK CARD and DEBIT, but when I use it as a credit card I get airline miles credit, which eventually gets me “free” trips. Debit comes out of my checking account a day or two faster than a credit entry while it gets processed through the airlines system, but everything gets posted as fast or faster than a check. I find it advisable to check the postings every day to make sure I do not fail to make proper entries daily, but this has helped me avoid overdraft penalties from overlooked check postings for many years and helped me to keep track of where my money went, how much I have available, and even cut back on my spending! I may have an envelope of receipts fatter than my bank statement every month, but I can get the occasional necessary cash from checking or savings account, or transfer from one to the other, at the nearest ATM without worrying about bank counter hours, better awareness of my spending, and an occasional no-charge flight. Good trade for me!

  19. Sandra October 6, 2011 at 1:57 pm

    I have used nothing but Credit Unions for over 40 years – they pay interest on checking and savings, there is no fee atm withdraws, there is no fee debit card usage and they do not get taken over by the feds..the tellers are friendly (they know who pays their wages) – they make auto loans and mortgages. What more do you need???

  20. Paul A. Bixler October 6, 2011 at 5:40 pm

    My Bank (Banner Bank) gives totally free checking including the use of a debit card. If you use your card at another bank or a local store, all credit card use fees are returned (within the US). I have used my card at different stores with an ATM and all fees have been returned.
    It is nice to have a bank that is not greedy.

  21. League Of Power October 7, 2011 at 7:41 pm

    Nancy Patterson Replies:

    Hi everyone, Thanks for leaving me your comments. It sounds like most of your aren’t willing to pay extra for the convenience of using your debit card. I’m with you. There are plenty of cheaper alternatives. Check back next Wednesday for more money saving advice!

  22. W. Fred October 8, 2011 at 4:25 pm

    If B A and other banks can and will charge fees for the use of debit cards, I can also switch banks. Matter of fact, I’ve already done that.

  23. Helen October 9, 2011 at 12:37 am

    I have a prepaid debit card and love it. It costs me $3.00 to put from $10.00 to $100.00 on the card at one time. However, when I use the card, I am charged $.93 per transaction. There is no extra monthly fees. I don’t know if this program still is available as an option. This program keeps my checking account out of reach of everyone else, and I can control how much I want in it at any given time.Therefore, if the card is stolen, I am not out of very much.

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