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.