Bank of America Customers Will Soon Pay for Using Debit Cards

Bank of America Customers Will Soon Pay for Using Debit Cards

If you use your Bank of America debit card to pay for things directly out of your checking account, you will soon be charged $5 a month ($60 a year) for the privilege. However, you don’t have to close your BofA account if you want to continue using a debit card without a fee. It just takes a little creativity.

We all know it’s best to pay cash for things, unless you can pay off your credit card bill every month to avoid being charged extra interest fees. One of the easiest and safest ways to “pay cash” is by using your debit card. A debit card takes money directly your checking account, it typically offers fraud protection, and you can instantly download your transactions into budgeting software like Quicken. Merchants pay less on a per-transaction-basis for debit card payments versus credit card payments; consequently, many vendors encourage debit card use whenever possible. As of today, merchants will pay even less. New financial regulations that went into effect October 1, 2011 cuts the merchant transaction fees for debit card payments essentially in half: from an average of 44 cents per transaction, to 24 cents per transaction. This is great news for merchants. However, depending on which company you bank with, it may not be great news for you.

This is because banks lose income when debit card transaction fees are lowered, so banks will typically try to make up the money in other ways. If they can’t make up the money by charging merchants, they will try to recoup their losses by charging customers. Bank of America has indicated the lowered debit card transaction fees will cost them approximately $2 billion annually, MSNBC reports. As a result, Bank of America will soon be charging all of its customers (except high-value or premium account holders) $5 a month, each and every month their debit card is used.

Customers will only pay the fee for months in which they use their debit card, but that means if you use your card just one time in a month to buy a $3 coffee, that $3 coffee just became an $8 coffee. This change will cost BofA customers up to $60 a year to use debit cards pay from their bank account—rivaling the annual fee of some credit cards. Of course, debit cards still won’t charge interest like credit cards do, but why pay fees when you don’t have to?

If you’re an affected bank customer, the solution may not be to leave your bank altogether since The Seattle Times reports that other big banks, like Wells Fargo and JPMorgan are following suit with the increased customer fees. Additionally, it can be a hassle to change everything over from one bank to another bank if you have things like direct deposit and automatic payments set up. So, as long as your current checking account isn’t paying you much—if any—of an interest rate for the amount of your average daily balance, you may want to check out some online-only banks.

Since online-only banks have lower overhead costs, many are still offering  free checking, free debit cards, free checks and free online bill pay. Several also offer additional benefits, like a percentage cash-back each time you use your debit card without typing in your PIN.  In many cases, online banks also allow you to transfer money electronically between other banks for free, so you can keep your primary bank account and just transfer money as needed to your online bank account for debit card purchases. Banking this way can also be a great budgeting tool. Since you will still have your main account set up with your direct deposit and your regular bill payments, you can only transfer to your debit card bank account exactly what you would like to spend on debit card purchases each month. This can prevent you from draining your main bank account by purchasing excessive $3 coffees. Of course, you’ll also have the added benefit an extra $60 a year in your pocket since you won’t be paying debit card fees.

Image: Image courtesy of pakorn at FreeDigitalPhotos.net

Reviews

  • Thomas

    October 03, 2011

    @Greg. BofA may charge for debit card fees but unlike interchange fees customers have the option of choosing another bank. I for one plan to close my account and open one with a local bank that is not planning to charge a fee for using my card.

  • Greg

    October 02, 2011

    Well, of course BofA and all other banks will find ways to make up for their lost revenues. Did anyone really expect them to cheerfully write off their losses and move on? Whoever did expect that probably also believed that retailers will be passing their savings on to their customers. Ever since the Fed cut the debit interchange fees it was obvious to anyone who was paying attention that consumers will end up footing the bill. http://blog.unibulmerchantservices.com/debit-card-fee-limit-lifted-to-24-cents-consumers-will-still-pay-for-it

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