Why Pay Debit Card Fees? Changing Banks, or Not

Bank of America will soon be charging $5 per month for consumers who use its debit cards to access the money in their accounts. This fee, to be charged whether you use your debit card once or several dozen times, is a direct response (a kind of “up yours,” if you ask me) to the recent limits on what banks can charge merchants for debit transactions, and a less direct response to rules on allowing debit card transactions to clear, triggering overdraft fees if consumers don't have enough money to cover them.

Banks make big money from fees of all sorts; this is something I've instinctively known since I was in college and paid some nasty overdraft fees of my own. Once, the tiny pub for which I was working was struggling so badly that my $23 waitress paycheck bounced — triggering a $27 fee. This caused another fee when a check I wrote bounced. Double ouch!

That's why I wasn't surprised in the late 1990s when I visited a mentor whose new role was in investor relations at a big consumer bank (now Wachovia). We had worked together in investment banking, and because we knew exactly how much money our group and department was making — we tracked it on team reports in our weekly meetings, and it seemed like a lot — I was bowled over to learn that the bank made more in fees than in all of its investment banking income in 1997. This isn't that unusual. Want to know what they earned in the last fiscal year?

  • Wells Fargo: $12.55 billion in fees and service charges. Nearly half of this is “service charges on deposit accounts,” most of which is probably overdraft and returned-item fees. That's 31% of total non-interest income. At about 70 million customers, this is $179 a year each.
  • Bank of America: $17.5 billion in fees and services charges. Well over half of this number is “service charges,” which the bank mourns in its 10-K “decreased $1.6 billion largely due to the impact of Regulation E.” It's 29% of total non-interest income. (Bank of America made more in investment banking income than Wells Fargo in 2010, by a lot.) But here's the worst part: with 57 million customers, this is $307 per year apiece.
  • JP Morgan Chase: $6.3 billion in fees and service charges. At only 12% of its non-interest income, Chase seems almost prudish. The bank makes way more of its income from investment banking, asset management (mutual funds and brokerage fees) and “principal transactions” — in other words, trading for its own account. In the investment banking world, Chase is doing great. (And some of the debit fees may be hidden in “credit card income”; it's not detailed.)
  • Citibank: $5.95 billion in fees and services charges. Citigroup is an enormous company with a huge variety of different revenue sources, and the bank breaks out its fees very differently; so these are a whopping 43% of non-interest income from its banking operations. Most of this comes from credit and debit cards; something Citi will be working extra hard to replace.
  • A Credit Union: $7.8 million in fees and service charges. I picked a credit union in my hometown, Unitus Community Credit Union, for comparison. This one has more than 52% of its non-interest income in fees; these work out to about $108 a year per member.

Despite the simplification of these numbers and the difficulty of comparing apples to apples (each bank categorizes its fees a little differently) it's pretty easy to see who is milking their customers for all they're worth and who is treating them relatively fairly. Banks have a natural and regulatory limit to how much interest they can charge — it's all based on the total assets on deposit and market rates set by the Federal Reserve.

Banks need to make up the difference
There's also the market's demand that public companies maintain a growth rate in revenue and net income from year to year. In a challenging economy and with the mean government creating more and more limits on how and when the customers (both those like you and me and the merchants who swipe your debit cards) can be charged, banks like Bank of America and Wells Fargo are going to need to find somewhere else to make up that fee revenue.

At $60 a year, a debit card fee may sound sensible to a bank which stands to lose about 20 cents a transaction after the Durbin amendment took effect at the beginning of October. At this rate, a bank can afford for you to make an average of 25 debit transactions a month without losing anything (and maybe you'll be gun shy and use it less).

What will this cost you?
Unless you have a “platinum” account or other premium account, like one tied to a brokerage account, most of the big banks will likely be including debit card usage fees in their fee lineup over the next several months. If you use cash (and take it out of the ATMs your own bank provides) or checks, you'll avoid the fees. While it may seem abhorrent to pay $60 a year for something we all once believed to be a banking right, compared to other fees we've absorbed without much of a fight — like out-of-network ATM fees (I saw one at $4 at a U.S. Bank machine and shrieked in terror, even though $3 fees are now common) and, of course, those nasty overdraft fees, this isn't actually that big.

Let's face it: Most of us have become accustomed to using our debit cards. They allow us to avoid carrying around ungainly piles of cash, or to write out checks and then have to do the accounting (remember checkbook balancing?). If you're already at a big bank like Bank of America, you'll end up paying the fee unless you're extremely stubborn and disciplined.

Should you change banks?
The attractiveness of getting a new bank depends on the sort of bank account you have now. If you have any of a panoply of ordinary checking accounts, take a gander again at some of those “average fees per customer” numbers I found. If you have a little time, go through your statements for the past year. How many fees did you pay? Would an alternative bank, like a credit union or USAA (the servicemember's bank for military members, veterans, and their families), charge you less?

It's quite likely that you would pay fewer fees at a bank that was less beholden to the demands of the shareholders. But you have a bigger question before you: does the hassle outweigh your reluctance to pay?

If you have bill pay and direct deposit set up at your Big Bank Account, and a linked credit card, savings or brokerage account, and CDs or other banking products connected to Big Bank, you may want to swallow hard and tell yourself, “it's just not worth it.” (And maybe your accounts could qualify for a debit fee waiver.)

But if you've already been thinking about switching to a credit union (remember, you're the shareholder at a credit union), are starting a new job or don't have many accounts, now could be a very good time — and, along with many other consumers pulling their accounts from big banks thanks to the Occupy Wall Street movement, maybe your bank might even pay attention and start dialing down the fee meter.

What I'm doing
I have an account with USAA, because my husband is in the Army. This bank makes me very happy; there are no out-of-network fees, and any fees that other banks charge me are refunded. The management has pledged not to charge for debit transactions. Customer service is amazing and they even have a really great iPhone app.

But I also have a Wells Fargo account that I opened last year for depositing freelance checks and cash. It's right down the street, and I don't have to wait several days to mail the deposit in to USAA. What I'm planning to do is to try for asceticism, and never use my debit card except at the ATM. I'll let you know how it goes; and track my fees to see if I succeed, or fail, at spending less than that average consumer.

Wish me luck!

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John
John
8 years ago

Why not use a credit card instead and pay it off every month? I have not paid any fees for any banking services for years. My main checking account is at a credit union, where I maintain a minimum balance of $500 in order to get free bill-paying service. I have savings with Ally, and also have their interest checking account which refunds all ATM fees from any ATM in the world. I use a rewards credit card for all of my day-to-day spending and pay the bill each month. So, not only do I not pay anything for banking… Read more »

Steve
Steve
8 years ago
Reply to  John

In regards to the credit card part, this is exactly what I do. I honestly haven’t used my debit card for anything other than an occasional trip to the ATM in the past 8+ years.

I also don’t maintain accounts anywhere that charge me monthly fees. Ally is great, I recommend them to everyone. One note – they no longer refund international ATM fees. Unlimited domestic ATM fees are still refunded, though.

John
John
8 years ago
Reply to  Steve

OK, I wasn’t aware that Ally had stopped refunding international ATM fees. I used mine in Canada last November and that fee was refunded. I guess if you travel out of the U.S. it’s hard to avoid some fees.

Steve
Steve
8 years ago
Reply to  John

Yeah I think the policy changed about six months ago.

One of your best bets for international travel is to have a Capital One credit card, since they don’t charge foreign transaction fees. It’s pretty much the sole reason I still hold onto mine.

Aldi
Aldi
8 years ago
Reply to  John

Some places only take cash or debit.

Casey
Casey
8 years ago
Reply to  Aldi

Costco, for example, doesn’t take credit cards

Stupidly Happy
Stupidly Happy
8 years ago
Reply to  Casey

I thought Costco took American Express. Am Ex does offer fee free cards – I have the Optima Platinum for Costco and restaurants that only take Am Ex.

Amanda
Amanda
8 years ago
Reply to  John

I too use my credit card for mostly everything and pay it off each month. HOWEVER, there are many people out there not disciplined enough to have cc. My MIL is one of them. I know of a few others who should implement the no cc rule too!

BALROG
BALROG
8 years ago
Reply to  John

John, Like you I use a credit card and pay off monthly. Also my wife and I still take out about $500 cash per week for kids, groceries, going out, walmart trips, hardware store, etc. We’ve done the weekly cash thing since we were married 21 years ago. Neither of us has a debit card and vow not to until it is cost effective. I still like the overdraft scam banks have on debit cards. Why people accept is beyond me. And I agree with Des that banks are free to charge fees on whatever they want. I just think… Read more »

Laura
Laura
8 years ago
Reply to  John

I’m curious what GRS readers plan to do when banks start charging a fee on credit cards that don’t incur interest charges. You realize that day will inevitably come. Society has changed such that it is difficult (not impossible, but difficult) to live a cash-only lifestyle – some kind of electronic account with credit/debit is usually required to pay bills and buy online. Banks are waking up to this and finding ways to charge both consumers and businesses for each electronic transaction. It’s only a matter of time until every type of electronic transaction carries a fee, including credit that… Read more »

Becky+P.
Becky+P.
8 years ago
Reply to  Laura

Why would they do this when they get a percentage from the business who accepts the credit card? As long as they get their money from the store, why do you think they will feel the need to charge the user? There would no longer be an incentive to use it.

Penny Pincher
Penny Pincher
8 years ago

When you’re given the choice between “credit or debit” at the register and pick “credit”, does that count towards incurring this fee at BOA? I mean, is it just using the card at all for anything, or is it only when you use it as a debit card?

andyg8180
andyg8180
8 years ago
Reply to  Penny Pincher

when you hit Credit on your BOA debit card,youll get a one time $5 montly fee for using the card… so only use debit with your pin number…

NooraK
NooraK
8 years ago
Reply to  Penny Pincher

The $5 fee with BOA will apply any time you use your debit card for a purchase, regardless of whether you choose “Debit” or “Credit” on the machine. You will not incur the fee if you only use your card at an ATM to withdraw cash.

chuck
chuck
8 years ago

If you have usaa and an iphone dont they offer check deposits through the iphone app now?

Megan E.
Megan E.
8 years ago
Reply to  chuck

YES! I use it all the time since my DH has a side job with a lot of checks – it takes less than 2 minutes and poof, the money is in our account! The only reason to hold onto a “local” bank is if you deal with a lot of cash – but checks are NOT a good justification, especially if you have a scanner or smart phone. Oh, and since people are talking about Ally – they also refund ATM fees AND let you scan a check in to deposit it! We use USAA & Ally and are… Read more »

karla
karla
8 years ago
Reply to  chuck

with caveats, only 2 of which I remember and I don’t know if you have to have all or some.

you have to have a US address (easier said than done if you are military) and/or you have to also use their insurance products (which I will, as soon as I get back to the States)

andyg8180
andyg8180
8 years ago

You have options like Ally bank or Incredible bank… both give interest on your checking accounts… Both have E-Bill pay, rebates on your ATM transactions etc… Ally has $9 overdraft fees for you naughty naughtys (why pay $36?) What i did was, i transferred a small amount to my new bank just to try them out, then i started moving my autotransactions to that including direct deposit… Once i was happy that no more transactinos would come into the old account, i moved 100% to my new bank… You can slowly move accounts… No need to do it all at… Read more »

DreamChaser57
DreamChaser57
8 years ago
Reply to  andyg8180

naughty naughtys ………LOL
Agreed, fantastic idea to transition to another account in an orderly and strategic fashion. Paying the equivalent of the light bill due to one bounced check seems needlessly punitive.

Lindsay
Lindsay
8 years ago
Reply to  andyg8180

One reason I haven’t switched to Ally yet is because there are complaints about it taking too long for deposits to be available. I have noticed this when I transfer money from my checking to Ally, it takes a couple of days, and this is a purely electronic transfer. To deposit a check, I believe you have to mail it in. Other online banks have the option of scanning and sending the check electronically but Ally does not yet. Another reason I haven’t switched is because of the caveats my bank put on the fees. One is not to use… Read more »

Megan E.
Megan E.
8 years ago
Reply to  Lindsay

Ally does have scanner ability – but you are right it can take 2-4 days for a transfer for them….

But it’s still pretty quick or you can use them AND another bank, like a local CU.

Steve
Steve
8 years ago
Reply to  andyg8180

The slow transition is a good approach, but everyone needs to be reminded of direct deposit and/or minimum balance requirements at both the new and old bank in order to avoid a monthly service fee. This fee would be way more than the debit card fee.

Paris
Paris
8 years ago

After all the shenanigans that commercial banks have been up to the last few years, I don’t understand why anyone maintains personal accounts with them. Credit unions are the way to go!

Bareheadedwoman
Bareheadedwoman
8 years ago
Reply to  Paris

sometimes finding a local credit union that you “qualify” to use can be impossible…

non union, not in services, not a public employee, not part of this network, that network, or don’t live in that county, state, neighborhood….

read an article years ago that said something to the effect of if you don’t qualify on the surface, go to the location and “ask, they are surprising glad to get customers…”

as far as the credit unions in my area, this couldn’t be further from the truth.

Megan E.
Megan E.
8 years ago

PenFed lets you qualify just by paying the $20 one time fee to join the national military family association for 1 year – then you are a member for life of PenFed and they have great services.

It just takes a bit more searching if you aren’t finding one for you quickly.

JMV
JMV
8 years ago
Reply to  Paris

Credit unions are great – I have an account there myself. But please don’t lump mega-banks in with community banks. If you have a bank in your community that is owned by people in your community – USE IT! Get to know the tellers, the bookkeeping department, loan officers if you need them. Community Banks are still there for their customers and DID NOT TAKE BAILOUT MONEY because they didn’t need it. They typically use sound banking practices….unlike mega-banks who are only out to make a buck!

maria
maria
8 years ago

$60 bucks a year to access accounts via a debt card.. no thanks! Of course you should leave Bank of Walmart.Plenty of banks ( especially credit unions offer free accounts and debit card use. Yes it may take a little thought to rearrange all the direct deposits, etc. but totally worth it my book.
The goal is to save and collect interest FROM the institution, not pay crazy fees or interest charges TO them that result in a net negative to your financial portfolio.
Run, don’t walk to the nearest no fee account!

Lindsay
Lindsay
8 years ago
Reply to  maria

I agree, however, there is no such thing as a no fee account! There are just accounts with less nasty fees or fees that you are more comfortable with (or fees that you just don’t know about yet, so you think there are no fees). I recommend before you switch accounts, don’t just read what they advertise, but search for their fee schedule, it should be in their disclosure documents. I made a spreadsheet comparing the fees across several banks, then you can use this to decide which is best for you (certain fees like international transaction fees may be… Read more »

Kevin
Kevin
8 years ago
Reply to  Lindsay

“there is no such thing as a no fee account!” … unless you’re in Canada. I bank with CIBC. I have a checking account and a savings account with them. As long as I keep a minimum $1,000 balance, I don’t pay any fees. My and my wife’s paychecks are automatically deposited, we pay our bills online and transfer money around (for various savings, and to pay off our Visas), we can deposit and withdrawal at an CIBC ATM, we get paper statements in the mail … all without paying a single dime in fees. This seems to be one… Read more »

Dan
Dan
8 years ago
Reply to  Kevin

Haha um I think you agreed with her exactly, this Canadian bank account you have has fees, you just said it, you just need to have $1000 to not get charged them. So again, that is not a fee free account.

Susan+Fillippeli
Susan+Fillippeli
8 years ago
Reply to  Lindsay

I bank with Wells Fargo and I pay no fees. Even under their current rules for the debit card fees, if those go nationwide, I won’t pay them. It seems to me that Wells Fargo has both a lower debit card fee ($3) and a lower hurdle for waiving the fee. I haven’t had a fee charged to either my checking or savings account at WF in the two years since Wachovie converted to Wells Fargo.

E. Murphy
E. Murphy
8 years ago
Reply to  Lindsay

I’m not sure why you would say there are no “no fee accounts.” We have been with Chase (formerly Washington Mutual) for sixteen years and have never paid them a penny for using their bank.

I assume you are talking about bounced check charges, but those are totally under your own control. I don’t mean to sound rude, but it simply is not that hard to keep your checking account in the black. No money? Write no checks.

Amanda
Amanda
8 years ago
Reply to  E. Murphy

I have money but I had it in a different account and had to get it transferred over to the checking account once and got a fee because I didn’t plan for the transfer to take that long. It occasionally happens to the most conscientious and people with money. Also, here at GRS there are people that haven’t a penny left at the end of the month because they’re paying their debt down and it sounds really judgmental the way you mention having no money.

Dianne
Dianne
8 years ago

The USAA iphone and android apps both have a way to take a picture of the check and have it deposited immediately, no matter where you are. It is much more convenient than even the most local bank branch.

Kathryn
Kathryn
8 years ago

I gotta be honest, guys, sometimes the posts on this blog irritate me. I get that this is a personal finance blog, and of course, the focus is going to be on saving money and time for the individual. But what about factoring in some other questions, like despite what’s convenient for me and whether or not I feel it’s worth paying the $5/mo fee, am I ok with a decision to continue to give my business to a bank that makes these kinds of decisions, milks its customers, etc.? Granted, I might say, no, I’m not ok with it,… Read more »

Pamela
Pamela
8 years ago
Reply to  Kathryn

I agree that other values need to be part of this decision.

Yes, I’m glad my community development credit union offers fee-free checking and debit cards, free online bill pay, and great interest rates.

But I’m more impressed that it supports wealth-building in underserved communities, teaches financial skills to young people by setting up branches in local schools, and pays its staff a living wage for our area.

I marvel that anyone would give their business to the big banks who are in the news every day for bad practices, making record profits, and have thousands of consumer complaints.

Wysteria
Wysteria
8 years ago
Reply to  Kathryn

Kathryn,

Rather as with the articles that have run on how much to pay for pets, the morality of the issue varies broadly. How much should one support businesses that (outsource jobs/raise animals for slaughter/hire immigrants/pollute/political issue of the day) is an issue I go to my priest/moral advisor of choice for. Every business and personal finance decision is a moral decision – I see no reason this blog should have to add a disclaimer to that effect to every post.

Mary
Mary
8 years ago
Reply to  Kathryn

These articles are very helpful. My bank’s fees went up to $12 a month including debit card fees and honestly, our budget can’t handle it. I also know seniors on social security who don’t have any more wiggle room in their budgets. People who are snowballing debt gladly look at even $5 extra a month as that much more to help their efforts. If you are in a place where these fees won’t affect you, that’s great! For others, this is great information.

imelda
imelda
8 years ago
Reply to  Kathryn

I rather agree with you, and I admire your POV – I would like to be more conscientious about my $$ choices, too. But Ms. Gilbert has gotten a LOT of flack for all of her past entries, for being too political. I suspect that if she had gotten into that issue in this case, people would have flipped their lids again. After all, the poor banks have to be able to make money SOMEHOW, amirite? Let’s stop blaming them for their totally reasonable reactions to the state of the economy, which they in no way contributed to or caused… Read more »

Marie
Marie
8 years ago

Sarah – great post! you mentioned that you have to “wait several days to mail the deposit in to USAA”. I have an Android phone and use the mobile deposit with them. best thing ever! does the iphone app not have that capability? or you can scan via your computer.

Janette
Janette
8 years ago
Reply to  Marie

I haven’t used the envelope deposit in years. [email protected] is on the services of USAA. It works perfectly.

Naomi
Naomi
8 years ago
Reply to  Marie

There are limits to the check amounts you can deposit with your phone. If you need to deposit a check over the limit, you can now deposit it in person a certain UPS stores. In Portland, the UPS store at 39th & Hawthorne accepts USAA deposits.

cc
cc
8 years ago
Reply to  Naomi

put this comment in the wrong spot- sorry!

cc
cc
8 years ago
Reply to  Marie

argh, just lost my comment.

my husband and i are both usaa members, i got the account through my dad (who served in the navy) and my husband got on through me.
i can do the photo/scan deposit at home, but my husband cannot- something about how many degrees you are from the person whom enabled you to get the account.

DreamChaser57
DreamChaser57
8 years ago

Superbly written article, I really enjoyed the figures on fee/service charged oriented revenue for the four big banks and a local credit union! The amount of money banks earn seems unfathomable and obscene especially when compared to the anemic interest rates the bank offer on checking/savings accounts. It did my heart glad to know that Chase fee/service charge revenue only represented a mere 12% of their non-interest income; I have been with them for over fifteen years. The sleek online interface is intoxicating, the range of services offered is a real value add, my local market is saturated with ATM’s… Read more »

Paz
Paz
8 years ago

The USAA iPhone app definitely has had the mobile deposit feature for several years. It’s incredibly convenient, and I certainly have no need for an additional bank account.

Sarabeth
Sarabeth
8 years ago

@Marie – I can’t speak for Sarah, but my husband also has to deposit his paychecks by mail to USAA. The iphone ap/scanning program have very strict parameters for the checks they will accept, and his company’s paychecks don’t meet them (they put asterisks in front of the amount on the check, which causes the ap to reject them).

Naomi
Naomi
8 years ago
Reply to  Sarabeth

USAA now allows you to deposit in person at certain UPS stores. The stores are listed on their website.

K-ro
K-ro
8 years ago
Reply to  Sarabeth

Count me as another fan of USAA Federal Savings Bank. Besides the refund of ATM fees and the no-fee for debit card use, I also have a fantastic overdraft situation. If I accidentally overdraft my checking, they do a cash advance on my USAA credit card (multiples of $100). While I incur interest for this, there is NO FEE (no cash advance fee, no overdraft fee). So if I pay off the overdraft with the next paycheck, I effectively have a fee of less than $1 for an overdraft. Oh, and on the USAA credit card I get 1% cash… Read more »

Steve
Steve
8 years ago
Reply to  Sarabeth

Doesn’t your husband’s employer offer direct deposit?

imelda
imelda
8 years ago
Reply to  Steve

I’m sure that’s NEVER occurred to her…..

Katie B.
Katie B.
8 years ago

I’ve been with USAA for 12 years now (I’m 30 years old). It’s a fantastic bank.

cc
cc
8 years ago
Reply to  Katie B.

they’re the only bank i trust… my parents sent me out into the world with a handful of usaa accounts, and whenever i need some new money vehicle, they’re right there, offering not to screw me over. i love it.
it’s awesome knowing that they’re just a good bank and not having to watch them like a hawk for extra fees and assorted hassles.

Paul+G
Paul+G
8 years ago

USAA has an app online called USAA [email protected], where you can deposit checks at home if you have a scanner. There is a daily limit which I cannot recall at the moment, but it is fairly high, like $5000 per day.

Steven
Steven
8 years ago

“There’s also the market’s demand that public companies maintain a growth rate in revenue and net income from year to year.”

Maybe this needs to change. Instead of pushing for constant growth (at what expense???) maybe we should demand that companies simply improve their systems. Instead of focusing on profit, maybe other metrics would better serve society at large. Seems the motto of late is profit over people.

Pamela
Pamela
8 years ago
Reply to  Steven

Good point, Steven. We’ve gotten stuck on the idea that businesses owe high returns to their shareholders. However, every corporation gets a state charter to operate.

Why don’t we emphasize the portion of the corporate charter that requires the company to operate in the public interest?

Adam Smith must be spinning in his grave to see what’s happened to capitalism.

Bill
Bill
8 years ago
Reply to  Steven

There are plenty of non-profit organizations out there. They have different goals than profit. Those that are for-profit seek to earn a profit. Sometimes that means firing employees and making tough decisions like raising fees.

imelda
imelda
8 years ago
Reply to  Bill

And sometimes it means poisoning the environment, exploiting employees, selling harmful products, or, say, bringing down the global economy.

The crimes caused by the corporate fixation on profits are numerous. Changing the system so that a company no longer has profit as its one and only goal – something that is reasonable and has been done successfully – could do a lot to lessen them.

Kathryn
Kathryn
8 years ago
Reply to  Steven

I could not agree more, Steven. There is a real tendency to think (and I’m seeing this attitude reflected in a lot of the comments on this post) in all-or-nothing terms. It’s all about profit, or it isn’t about profit at all. What about reasonable balance?

Clint
Clint
8 years ago

Isn’t Wachovia Wells Fargo now? And when Sarah says the banks will lose 20 cents per swipe under the new regs, does she mean “lose” as in no profit, or that the banks will make 20 cents less than they used to?

babysteps
babysteps
8 years ago
Reply to  Clint

from what I’ve read, it’s that they will make $0.20 less than they used to. The transaction is still profitable for the bank. We started switching our accounts from Chase to a local community bank last year and completed the process this year (before the new regulations kicked in). We have no fee checking, hooray! Even cash back program (small, but every penny helps) if you use your ATM card as credit for purchases. Admittedly it does cost any bank something to offer me a checking account, but I find it interesting that the institutions with the lowest fees on… Read more »

Steve
Steve
8 years ago
Reply to  Clint

That was my question. It’s not like banks are losing money every time you use your debit card. They were just counting on the profit they would make from it. IMHO The $5 is a combination cash grab from their customers and incentive to switch to using a credit card (which haven’t been regulated – yet). With a little “we told you this would increase fees” thrown in to thumb their nose at those pesky regulators. I actually support costs reflecting the cost of the underlying service. Meaning, if it costs $5 per month to service a checking account, charge… Read more »

Megan E.
Megan E.
8 years ago
Reply to  Sarah Gilbert

so this means you would cost the bank more if you used your card more than 25 times in a month…but if you use it less, they get even more money?

Geez…talk about thumbing noses, that’s just cold business.

Anne Burner
Anne Burner
8 years ago

Perhaps the new debit card fees will bring about a resurgence in the use of paper checks. Having just moved a few months ago, I got new checks with my new address. I got them discounted through one of the mail-order places you see in the coupon inserts in the Sunday paper. I really only use one or two a month, but I’m having second thoughts about that now with this upcoming fee (yes, I have a BoA checking account!). I usually use my debit card and cash during the week, but now I’m thinking of changing how I use… Read more »

Bella
Bella
8 years ago
Reply to  Anne Burner

Paper checks are not goign to return. Teh bottome line is that yea, a check is usually cheaper for business *if the check is good* than a credit card. The problem is that since credit cards are so ‘good’ for consumers (points, rewards etc..) the belief is that no one would choose to pay with a check unless they can’t get a credit card. And if you can’t get a credit card – they certainly don’t want your check.

Dan
Dan
8 years ago

I rarely ever use my debit card to shop with. Maybe twice a year. Its much harder for me to hand over cash, then it is to swipe my card. I end up spending far less money.

Ris
Ris
8 years ago

One thing that I can’t seem to find the answer to is this: If I use that Bank of America account for online billpay, is that considered a transaction that I will be charged $5 for? Because I’ll have no problem avoiding using my debit card, but several online billpay accounts are linked to that BofA account and it would be a hassle to unlink all of them and not use the BofA account to pay those bills.

Tracy
Tracy
8 years ago
Reply to  Ris

It depends on how your online bill pay is set up – if you’re using the debit card number, you’ll be charged, if you’re using your bank’s routing number and your account number, you won’t.

Heather
Heather
8 years ago

I switched to a credit union last year after I got sick of incurring a fee from Wells Fargo every time I turned around. That has yet to happen with the credit union.

Sarah mentioned that it might not be worth the hassle if you have automatic deposits & withdrawals to switch. The banks are counting on that – people thinking it will be too hard to switch. It’s really not! Just make sure you find out from the companies when they’ll start taking the money from your new account (this billing cycle or the next).

J.R.C.
J.R.C.
8 years ago

It seems to me that IF you are just a debit card user (and not credit for whatever reason), then moving to a small bank/credit union makes sense… As long as you don’t travel regularly. If you’re local 95% of the time, it shouldn’t be a problem to get cash from the ATM near your home. I suspect the ‘value’ of a larger bank is if you need to get cash out of atm’s regularly and are regularly not near your home branch when you need cash. If you can join an online bank like usaa, or charles schwab, or… Read more »

babysteps
babysteps
8 years ago
Reply to  J.R.C.

even if you travel there are ways…

many credit unions are part of a network where they act as each other’s branches – their ATM is your ATM, you can even make deposits at the counter, etc.

If you use your ATM as a debit card to make a purchase at a merchant that allows cash back (grocery stores, US post office, etc) you can get fee-free money most places in the US.

I think there was a whole GRS post on this in the last year or so?

Steve
Steve
8 years ago
Reply to  J.R.C.

I have been a credit union member for a decade, traveled to five different continents in that time, and not once have I been able to get my money out of an ATM.

Bareheadedwoman
Bareheadedwoman
8 years ago
Reply to  J.R.C.

the advent of the TSA has severely hampered my travel options so anything that can’t be reached by car, train, or boat is a no-go…so finding an ATM generally isn’t a problem…

but I’m curious, do traveler’s checks still exist? I remember having to stock up on those as part and parcel to “getting ready” back in the day….

Steve
Steve
8 years ago

They do exist, but the fees are pretty bad. I get my money from ATMs at a pure exchange rate with a 1% foreign transaction fee. Travelers checks charge I think 3%, and then when you go to cash them/use them in the foreign country, you get dinged again. Honestly I’m surprised they do still exist.

Brad
Brad
8 years ago

I’m currently moving all of my banking to USAA from Chase.

J.R.C.
J.R.C.
8 years ago

One other thing. We all like to hate on banks for this $5 fee, and feel that the banks are giving customers the finger. But this part of the Dodd-Frank act that regulates retailer transaction fees was pushed through by the retailers association (Walmart). They are the ones who really benefit from this bill. Retailers get the benefit of cost reduction on debit card transactions (somehow the credit card fee reduction didn’t survive the legislation process). Walmart claims this will let them lower prices further(I find that difficult to believe, but it’s a complex topic). The Debit card transaction fees… Read more »

Jamison
Jamison
8 years ago
Reply to  J.R.C.

BINGO! Banks were not so evil and hated in this country before the federal government stepped in and started telling them what they HAD to do. You think banks are evil because they charge $5? Well, I think the federal government is evil for FORCING banks to lend money to people for home loans who were in NO shape to pay those loans. Banks USED to be able to say “no, I can’t give you a home loan” becuase 1) the bank would end up losing money and having to sell a forclosed house and 2) the person asking for… Read more »

Golfing Girl
Golfing Girl
8 years ago
Reply to  Jamison

Amen. People don’t want to do a root cause analysis of where the problems originated, they just see an end result. You can thank Ex-President Clinton for the “Fair lending” push that started the housing bubble, which ultimately led to the banking bailout. Make banks lend billions to unqualified borrowers and what do you think is going to happen?

Lindsay
Lindsay
8 years ago
Reply to  Jamison

I didn’t think banks were forced to give mortgages to people, I thought the problem was that banks were pushing ARMs that they knew the people wouldn’t be able to afford in a few years, knowing they wouldn’t be left holding the bag because they bundled up those bad mortgages and sold them as toxic assets, which the S&P had given AAA ratings too. Even in 2009, I had a mortgage broker trying to convince me that I could afford a $250,000 mortgage if I just stopped eating out for lunch every day. And I don’t eat out for lunch… Read more »

JMV
JMV
8 years ago
Reply to  Lindsay

Key word in your comment – MORTGAGE BROKER. I worked for a title company for a few years and was shocked by the things I saw mortgage brokers do to make a dollar. There are good ones out there, I’m sure, but many horrible ones as well.

Kevin M
Kevin M
8 years ago

I just do not understand why anyone would pay for the privilege of putting their money in a bank. There are plenty of options out there…I have never paid for a checking or savings account in my life.

Cherleen @ My Personal Finance Journey
Cherleen @ My Personal Finance Journey
8 years ago
Reply to  Kevin M

This is what I exactly have in my mind. When I put my money on their bank and use it when somebody applies for a loan, they earn from it. Now, if I use my own money, I will be charged and has to pay for using my own money. I really cannot understand it.

Nick
Nick
8 years ago

My comment isn’t directly related to personal finance, but to the ethics behind bank fees. I just wanted to point out that all the bank fees are typically charged to the folks that are the least able to manage this cost – mostly the middle and lower class folks. It makes me really sad that the banks use this “tax” on poor people to stay in business. Just by the nature of things, you don’t see rich people paying overdraft fees. It’s another institution in our system (not quite as bad as payday loans, but still) that makes it hard… Read more »

Steve+S
Steve+S
8 years ago

I only use my debit card as an ATM card.

Chalk up another point for self-control and being able to use your credit card responsibly and pay it off every month.

southerngirl
southerngirl
8 years ago

My bank started charging debit card fees, so I’m in the process of moving my checking account to Perkstreet. They have a debit card that gives you 1% on all purchases and 2% if you have a balance of $5000. In the past I’ve thought about using a rewards credit card but have been too worried about not being able to pay the monthly balance off. This way I know I won’t spend money that I don’t have because it’s coming out of my checking account.

Jennifer Gwennifer
Jennifer Gwennifer
8 years ago

another reason to love my local bank. Free ATMs Worldwide! any ATM charges by other banks are refunded by my bank within 3 days.

Mom of five
Mom of five
8 years ago

We really haven’t used Debit cards for anything other than accessing our ATM for several years now. And even that we generally only do once a month. Once we got some financial discipline, it made more sense to use a credit card for points since we paid the balance in full each month. We also enjoy more protections with our credit cards.

Jamison
Jamison
8 years ago

Sorry, I have never sympathized with people who complain about banks making too much money. They are a business. You give them money. They keep it and if you want it, you get it. They have to make money somehow in order to keep your money safe and give you interest. Don’t like fees? Join a credit union (I have been a member at 2 credit unions for 10 years) or a local, small town bank. Don’t have a credit union close by? Buy a $500 gun safe, mount it in your house for another $150, and keep your money… Read more »

Andrea
Andrea
8 years ago
Reply to  Jamison

I really dislike your final comment- The poor have cable TV. really? Because I work with two shelters/soup kitchens and those poor have next to nothing. Stick to comments on the topic – not memes demonizing the poor.

Andy
Andy
8 years ago
Reply to  Andrea

I happen to agree with that assessment. Most broke people are broke because they REFUSE to do stuff rich people do. Broke people are victims of their own unwillingness to live w/in their means. No one ever held a gun to a broke person’s head to take out a loan for a $15k car with 5 years of payments (which makes the car cost more like 20k) instead of paying cash for a cheaper car. Don’t blame the bank for making that loan. I’ve hired broke people as employees. Wow, no matter what you do to help them get ahead,… Read more »

Jamison
Jamison
8 years ago
Reply to  Andy

I will correct myself. Sure, there are poor people. They come by our church often. They have no home and own a grocery cart. We give them food and they are so appreciative. I am talking less about the helpless and more about the clueless (turn on the news, anything with “Occupy” in front of it is mostly clueless people.) My brother used to work at one of those rent-to-own places. People would come in every week, repeat customers, and pay $100 a week to rent that 42 inch big screen TV. My brother knew most of these repeats by… Read more »

Bareheadedwoman
Bareheadedwoman
8 years ago
Reply to  Andrea

difference in attitudes usually stem from different definitions of the word “poor”. I personally know a lot of rural poor people (and city elderly) who decidedly do not have cable…no running water/hot water, no cable, no elec, no phone, and only a part-time car (repairs) or shared access to transportation, who are barely able to survive. And quite frankly, many of them have not been blessed with the mental capacity to “earn/borrow college, move to a city” or otherwise adapt to more advanced ways to better their situation. But they are good people and wise in their way. I know… Read more »

imelda
imelda
8 years ago

Amen.

People just don’t want to hear the truth.

Megan E.
Megan E.
8 years ago
Reply to  Jamison

But they don’t give you interest….in fact, putting the money in a safe in your backyard would mean loosing just the same amount as putting it in BoA’s checking account (for example).

Without interest, our money looses value every year!

Banks SHOULD pay at least inflation on an account, otherwise we are paying for convenience and the use of a piece of plastic.

Tiffany
Tiffany
8 years ago

I recently bought a new house, making getting to a BofA out of the way, where as there is a Key Bank and an US Bank about two blocks from my new place. When BofA talked about these fees, I decided that it was the final push I needed to switch to a closer bank. I moved my direct deposit and waited for everything to clear the BofA account. When I went to close the BofA accounts, I found out that I would not have paid the $5/month debit fee anyway because I have, what they call a, ‘wide profile’… Read more »

Melissa
Melissa
8 years ago

We’ve had account with USAA for over 10 years and have had great service. We have only good things to say about USAA banking and USAA insurance too.

Joe
Joe
8 years ago

This is a very timely post for me – I just received notices of fees being initiated at my TCF and Citibank accounts. I already started moving funds from Citibank to Ally and I am investigating small, local banks for my TCF accounts, my children’s TCF accounts, and my two business TCF accounts. I called and complained to TCF and fully expect a call back from them to ask me to reconsider – they are going to lose approximately $30K in deposits from me, my family, and my businesses for implementing a $10 a month fee. There is no way… Read more »

Golfing Girl
Golfing Girl
8 years ago

Thank you for your great write up. So many people think all banks are evil for charging any fees at all. But after working at a regional bank, I realize that most fees can be avoided by chosing the right product at the bank and by keeping close track of your balance (yes I still balance my checkbook).

The bank has to pay its employees and the government regulations are causing some banks to start up entire departments dedicated to tracking and managing the new regulations, so it’s getting more expensive to operate.

LD
LD
8 years ago

I switched from Chase to PerkStreet a few months ago. In the last year, I ‘earned’ $70 in various fees from Chase – mostly from non-Chase ATMs as there are no in-network ATMs closer than 10 miles away. So far, in just a few months, I’ve earned $132 in perks, which I can turn into gift cards (including a Mastercard cash card). Not only that but I now have something like 30,000 fee-free ATMs to chose from – including one that’s right next door to my work and one a block from my home! I spent the last few years… Read more »

Bill Rice
Bill Rice
8 years ago

I think it’s important that this kind of education gets out to the masses. Jumping straight to the credit unions switcheroo and everything becomes wonderful is a romantic notion at best.

Regulation is not evil, but it can cause unintended consequences. I think this might be more of a civics lesson than a moral issue.

Des
Des
8 years ago

Big bad banks are out to screw you. How completely trite. What do you suppose would happen if the government told blog authors they could no longer make as much as they do through advertising – that now they could only make half what they used to? What do you suppose bloggers would do? Display twice as many ads? Charge for content? Sit and take the reduced income? Probably not the latter, but how many readers (who consume the content for free, btw) would be miffed by the first two options. People seem to feel entitled to consume banking products… Read more »

Britton
Britton
8 years ago
Reply to  Des

The statistics are interesting, but I would like a little more color. For interest, my personal experience with credit union fees has been that I haven’t paid any, and expect to continue not to pay any, except for overdraft fees that were my fault (and even then they were willing to reduce them after I put in a phone call). What I would rather see are *what kind* of fees these organizations have in place. Specifically, at which banks can you expect to pay a fee on “normal usage” (which I understand is vague, but I would define as having… Read more »

Bareheadedwoman
Bareheadedwoman
8 years ago
Reply to  Des

If banks were still big brick buildings because your cash was in a hole in the wall in back and its guards kept Mr. Criminal out of it, then perhaps I would lend more credence to the “services cost money” argument. As it is, the bank is charging me electronic fees to use my electronic money to lend out at three times the interest rate it pays me…if it pays me. It is no service to protect my money and most people hit by the fees actually have their savings in other vehicles not controlled by the bank…if you do… Read more »

Des
Des
8 years ago
Reply to  Sarah Gilbert

There is a difference between taking fees into consideration (which is obvious and reasonable) and saying that banks that charge fees are “milking their customers for all they’re worth”. I can’t speak for others, but I could do without that kind of editorializing.

imelda
imelda
8 years ago
Reply to  Des

People feel entitled because banks got rich for decades in this country without charging these ridiculous fees. Banks have not always tried to bleed their customers dry.

But now they do, so yeah, we’re pissed, and I think that’s justified.

Des
Des
8 years ago
Reply to  imelda

No, the banks got rich for decades by charging these fees in a way that hid them from view of the consumer. You were always charged in an obfuscated fashion and you’re only mad now because you’re seeing the fees. They are not “bleeding you dry” they are reacting to changing legislation. I imagine this is the same type of reaction people would have if Social Security taxes came as a bill in the mail rather than as a payroll deduction. Once people are forced to be aware of what they are being charged, they become much more price sensitive.… Read more »

imelda
imelda
8 years ago
Reply to  Des

While I’m no expert in banking history, I understood exactly the opposite. Banks used to charge straightforward fees – regular monthly service charges to have an account, charges for checks, etc. Then they discovered that “free” was an irresistible lure for customers, and they found they could make much more money by getting rid of overt fees and replacing them with ones hidden in the small print. So yes, I agree, I’d rather have the charges I pay for be upfront and clear, rather than the current black hole of charges that no one – not even the bank employees… Read more »

imelda
imelda
8 years ago
Reply to  Des

Oh and PS, I’m not mad about BoA’s new fee. I think banks *should* charge for the services they provide, rather than ripping off their customers with sneaky fees.

If all banks charged $5/month for use of their cards instead of $26 for each overdraft (which they exacerbate by changing the order of your charges), we’d have a much healthier and fairer banking environment.

Jeff
Jeff
8 years ago

Can anyone tell me how good USAA’s online banking and bill pay is compared to BOA?

And I understand that I can be a USAA member even if I’m not a member of the armed forces?

Evan H.
Evan H.
8 years ago
Reply to  Jeff

USAA’s bill pay feature is very similar to Bank of America’s, even down to the number of days payments will take to process (typically two business days). E-bills are available as well as payee accounts.

Recently, USAA has opened their banking to the general public. Previously, their availability was restricted to veterans, active duty, current/former military dependents and their spouses. Since my father-in-law is a veteran, I have a joint account with my wife.

BIGSeth
BIGSeth
8 years ago

I have a conspiracy theory that people leaving BofA is exactly what they want. I think someone up top said, “They already hate us. Why don’t we get rid of the headache of servicing people with $300 dollars in their account, close some branches, and focus on the big fish?”

Just a thought.

cherie
cherie
8 years ago

just a reminder – I’m not military and I use USAA – that requirement is not for their banking services. Aside from low fees their CS is outstanding.

Amanda
Amanda
8 years ago

I just got a debit card through ING Direct. No fees!

Ben
Ben
8 years ago

I really like the Fidelity Cash Management Account (formerly MySmart Cash Account). They offer free checking, debit and bill pay, have a nice online site, checks can be deposited using my iPhone, and they actually work with Quicken. All ATM fees are refunded within a day or two of using the ATM, and I manage my retirement accounts there as well. Accounts to other banks can be linked and money transferred online (ACH is free both ways). Also, they have never charged me a fee for incoming wire transfers (rare, but nice since bank wire fees are usually $15 –… Read more »

Shari
Shari
8 years ago

“Let’s face it: Most of us have become accustomed to using our debit cards. They allow us to avoid carrying around ungainly piles of cash, or to write out checks and then have to do the accounting (remember checkbook balancing?).” Okay, I’ve been wondering about this for a long time now. For people who don’t balance your checkbooks, how do you know how much money you have? When I go online and look at my balance there, it is always AT LEAST $200 more than I really have because of checks and other transactions that have not yet gone through.… Read more »

BD
BD
8 years ago
Reply to  Shari

I can’t speak for everyone, but I’ve used Intuit’s Quicken for years. LOVE it. I’ve always been really fanatical about tracking where all my money is going, and Quicken is a great tool for doing so. I’ve never overdrafted in my entire life.

Kevin M
Kevin M
8 years ago
Reply to  Shari

I’m guessing most people don’t use checks anymore, so everything is instantaneously cleared (no float). If I buy something on debit, by the time I go home and look it up online it is there. The only reconciling items I have when I compare book to bank balance are future automatic withdrawals.

Kevin
Kevin
8 years ago
Reply to  Shari

“For people who don’t balance your checkbooks, how do you know how much money you have?” I check online. “When I go online and look at my balance there, it is always AT LEAST $200 more than I really have because of checks and other transactions that have not yet gone through.” I know when the big transactions go through (paychecks go in automatically, mortgage comes out automatically), and keep a buffer. Right now, we’ve got about $8,500 sitting in our account, because a) my wife just got paid last week, and b) we’ve got $4,000 in regular and extra… Read more »

Tara
Tara
8 years ago
Reply to  Shari

I still keep a checkbook register just like you do… since I have very little money in my checking account, it needs to be accurate down to the penny to avoid overdrafts.

Wysteria
Wysteria
8 years ago
Reply to  Shari

I keep $100 of my savings in my checking account, though that is a privilege I know some cannot afford. It does save on overdraft charges, and it means I don’t have to micromanage too much.

Des
Des
8 years ago
Reply to  Shari

I:

1. Pay in cash for small transactions.
2. Know when the larger debits are going to come out and budget accordingly.
3. Have an overdraft protection account in case I mess something up.
4. Check my account online regularly.

Stacie
Stacie
8 years ago

Just like any business, banks have the right to charge whatever prices/fees they want. And the only way customers will get these banks to listen is by speaking with their money. I have BOA and even though I never use my debit card since I opened a new account with PNC, I am closing my BOA account because I don’t like the idea of the fee. Also I really liked the numbers analysis. Since I know I’ve never payed BOA $300 in fees in my lifetime, it’s a little scary thinking about how much in fees others must get charged… Read more »

Andy
Andy
8 years ago

Cash is King.

Cash in an envelope that represents your monthly budget for a spending category is the way to go. Small merchants LOVE cash.

With all the nonsense banks and the government are doing, buying with cash has never been smarter.

Kevin M
Kevin M
8 years ago
Reply to  Andy

Until you lose your wallet and you’re out $300.

chacha1
chacha1
8 years ago

I’m in the habit of using my debit card for almost all of daily-life transactions. If my bank (Union Bank of California) decided to start charging a monthly fee, I would probably switch to using a rewards credit card instead … since I have no quarrel with the bank otherwise, switching banks would be an unnecessary hassle.

I agree with Stacie that the biggest “scare” factor here is the implication of just how many people routinely overdraft their accounts. That demonstrates a basic failure in financial education that no amount of banking regulation can mitigate.

RNagami
RNagami
8 years ago

The article mentions out of network ATM fees. Just thought I’d mention that Schwab investor checking reimburses those fees, pays interest on checking (of course it’s super low), and doesn’t require any minimums as far as I can tell. I use BOA as a shell account to deposit checks physically and transfer money to Schwab to withdraw at non-BOA ATMs when necessary. Initiating transfers from other institutions is usually free (Telling ING to take money from a BOA account is free. Telling BOA to send money to ING costs $). Oh yeah, and am I the only one thinking: use… Read more »

Lindsay
Lindsay
8 years ago

Just a thought, but what if everyone went back to writing checks instead of using their debit cards? Wouldn’t that create more of a hassle for the banks and actually cost them more?

Carla
Carla
8 years ago

“Let’s face it: Most of us have become accustomed to using our debit cards. They allow us to avoid carrying around ungainly piles of cash, or to write out checks and then have to do the accounting (remember checkbook balancing?).” I don’t understand that statement because though I use debit cards and still write some checks, I still balance a checkbook (in a hard cover “cash” book I got from the drugstore). Is it the assumption that if you use debit, you don’t need to balance a checkbook? Online banking is a huge help, but it doesn’t tell you what… Read more »

Shari
Shari
8 years ago
Reply to  Carla

Exactly! I have family members who never balance their checkbook–they rely on what the bank tells them they have. Unfortunately they regularly forget transactions they made that haven’t gone through yet and end up overdrawing their accounts. It may be okay for people who have a good cushion in their account, but for people who don’t have much, they really can’t afford NOT to keep close track.

Carla
Carla
8 years ago
Reply to  Shari

@Shari – Its also very helpful because there are times when I look at my account activity online and the transcription description is so vague, I don’t know or remember what it was for. All I need to do is look in my book to see what it really is (or if its was a bank/merchant error).

KB
KB
8 years ago

As a bit of a side note/history lesson, can anyone tell me when banks started charging all these fees? Simple overdrafts aside, wasn’t there a time when banks started and received all or most of their income from efficiently investing our money, when they were fighting to make sure they kept our business?

Laura
Laura
8 years ago
Reply to  Sarah Gilbert

Yes, please do. I remember long ago when I was young that banks wanted people to have checking and savings accounts because they then had your money to loan out to other people. (This was just before credit cards were common.) Now banks act as though it’s a big favor to have your money in their institutions and thus you must be charged for it. It’s a completely different mindset.

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