What to Do About Debit Card Fees

Bank of America’s announcement that early next year it would start charging most customers $5 a month to use their debit cards drew howls of protest. Credit-shy consumers now use debit cards for nearly half their purchases, according to a recent survey. But a provision in the Dodd-Frank financial-reform bill, which went into effect October 1, cut in half the interchange fee that merchants pay banks each time consumers swipe their debit cards.

In response, many banks are imposing debit card fees to make up for lost revenue. At Bank of America, you trigger the monthly fee when you swipe your card at the point of sale or arrange for payments to be debited automatically from your account—but not when you withdraw cash at an ATM.

BofA is not alone. Other banks that impose a debit card fee or are testing one in some states include Chase, Regions Bank, SunTrust and Wells Fargo.

Of the megabanks, only Citibank promises not to institute a debit card use fee. “The bottom line is that customers don’t want to pay to use their debit card,” says Stephen Troutner, of Citibank. But Citibank announced hefty hikes in its account-maintenance fees starting December 9.

What’s a consumer to do? If your debit card helps you keep a lid on spending, paying $60 a year for the discipline might be worthwhile. Or you could keep a wad of cash in your wallet for daily expenses and use a credit card for big-ticket items. If you’re prepared to keep a large minimum balance, your bank may still offer a no-fee checking account. Or you could switch to a credit union or a community bank, both of which are unlikely to require large minimum balances or impose debit fees.