Bank of America recently announced its plan to implement a $5 monthly fee, in early 2012, that would apply to certain customers who use debit cards to make purchases. The new fee would not apply to customers who only use debit cards to withdraw cash at ATMs, nor would it apply to customers with platinum privileges, premium accounts or advantage accounts, or to small business customers. Although Bank of America is getting most of the heat on the debit card fee issue, other banks have already implemented debit card fees, either across the board, or in test markets. If you're affected by the new fees, what are your options?

TUTORIAL: Banking: Introduction

Switch Banks
Switching banks could turn out to be a lot of work for nothing, if the bank you switch to follows Bank of America's example and implements its own debit card fees. However, if you have multiple reasons for wanting to change banks, the new debit card fee could be a good impetus to finally make the switch. Switching banks, especially if you're switching from a brick-and-mortar bank to an online bank, can mean savings in ATM fees, monthly fees and other fees. It could also mean more satisfying customer service, better interest rates on deposits and the convenience of never having to visit a bank in person. Before you switch, find out if your current bank charges a fee to close your account and, if so, what you might be able to do to avoid it. (For related reading, see Cut Your Bank Fees.)

Change Account Types
Let's say you currently have a checking account with Bank of America that will be subject to the new debit card fee. What would it take to qualify for one of the fee-exempt platinum, premium, advantage or small business accounts?

Let's look at the advantage account as an example. To avoid a $25 monthly fee, you'll need to meet one of the following criteria:

  • Have an average daily balance of at least $10,000 across your checking, savings and CD accounts
  • Have at least $15,000 outstanding on an installment loan or line of credit
  • Have a Bank of America mortgage
  • Have at least $15,000 in eligible linked brokerage accounts

This is just one example of one account with one bank, but with requirements like these, switching account types to save money is probably not a viable option for many consumers.

Change Your Payment Method
The simplest option is to keep your checking account in the same place, but change the way you pay for purchases. Cash and gift cards are alternatives that force you to spend only what you have, in the same way that debit cards theoretically do. However, they entail some risk of loss or theft. Credit cards offer great protection against these risks, but come with the risk of spending beyond your means. Knowing what kind of spender you are should be a key factor in deciding which payment method to switch to.

Choose to Pay the Fee
Debit cards offer less protection against theft or loss than credit cards, but more protection than cash or gift cards. Similarly, they offer more protection against overspending than credit cards, but less protection than cash, since it's possible to overdraw your checking account. However, if you have a rocky history with credit cards and shopping with debit has kept you out of trouble, the small fee you'll have to pay to keep making purchases with your debit card, will pale in comparison to the charges you'll incur by abusing a credit card. (For related reading, see Should You Pay In Cash?)

The Bottom Line
The new fees can be a drag on your finances, or create hassles in changing banks or spending habits. However, you can choose to look beyond all the negativity surrounding this issue and use it as an opportunity to reevaluate your banking and spending habits. The positive changes you might decide to make, could have payoffs that far exceed saving $5 a month.

Related Articles
  1. Savings

    How Americans Can Open a Bank Account In Thailand

    Have your paperwork in order and be sure to shop around.
  2. Credit & Loans

    6 Ways to Load Your Walmart Money Card

    Discover the six main ways to reload funds onto a Walmart MoneyCard and the benefits and fees on each of the four types of cards offered.
  3. Credit & Loans

    Walmart MoneyCard Vs. Walmart Credit Card

    Discover how the Walmart MoneyCard and the Walmart credit card have different benefits that may influence your decision on which one to choose.
  4. Wealth Management

    How To Open And Access An Offshore Bank Account

    Opening an offshore bank account does not require a high level of financial sophistication. It’s a lot like opening an account at your neighborhood bank.
  5. Credit & Loans

    Banks Can Notarize Your Documents for Free

    Learn how you can obtain the services of a notary public for free at your local bank branch, along with other places where you can have a document notarized.
  6. Budgeting

    How Does Apple Pay Work?

    Discover why more businesses and smartphone users are opting to participate in Apple Pay, a new, revolutionary mobile wallet program.
  7. Savings

    4 Ways to Ditch Bank Overdraft Fees

    At $35 a pop, overdraft fees can mount up quickly. Here are 4 different strategies for avoiding them.
  8. Economics

    What is the Cost of Funds?

    Cost of funds is the interest cost financial institutions pay to use the funds they deploy in their business.
  9. Savings

    Try These Ways to Reduce Your Bank Fees

    The tables have turned on consumers: Not only are bank account interest rates measly, but fees can take a serious bite out your balance. Here's what to do.
  10. Savings

    Don't Get Ripped Off at the ATM

    As our dependence on automated teller machines rises, so do those nasty little charges for using them. Here are some tips on bypassing fees.
  1. Does Netspend accept wire transfers?

    NetSpend accepts some types of wire transfers to add money to the prepaid debit cards it issues to its customers. There are ... Read Full Answer >>
  2. Does Netspend report to credit bureaus?

    NetSpend does not report to credit bureaus in any capacity. NetSpend is a prepaid debit card program that allows cardholders ... Read Full Answer >>
  3. Where can you use a Walmart MoneyCard?

    You can use a Walmart MoneyCard anywhere Visa Debit or Debit MasterCard are accepted. In addition, the Walmart MoneyCard ... Read Full Answer >>
  4. Can Netspend cards be used internationally?

    NetSpend cards can be used internationally, and they are accepted at any location that accepts debit Visa or MasterCard. ... Read Full Answer >>
  5. Will Netspend cards let you overdraw your account?

    NetSpend lets cardholders overdraw their accounts, but only if they previously enrolled in the overdraft protection service. ... Read Full Answer >>
  6. Does NetSpend work with PayPal?

    NetSpend works with PayPal; a PayPal account can be linked to a NetSpend account, and vice versa. Also, PayPal allows its ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center