Credit & Debt

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.

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.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked
stocks

The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked

The Berkshire Hathaway portfolio is a diverse set of blue chips, and increasingly, lesser-known growth bets. Here's a look at every stock picked by Wa…
November 16, 2021
Resist the Impulse to Buy These 14 Holiday Gifts
shopping

Resist the Impulse to Buy These 14 Holiday Gifts

Don't let those holiday sale promotions persuade you into buying something now that will be much cheaper later.
November 18, 2021

Recommended

What to Do If Your Credit Card Is Closed
Making Your Money Last

What to Do If Your Credit Card Is Closed

The issuer may restore your account with the previous terms, or it may request that you reapply for the card.
November 22, 2021
Virtual Numbers Make Cards Safer
Technology

Virtual Numbers Make Cards Safer

Some mobile wallets offer this feature, which randomly generates virtual digits that are linked to your credit card.
November 1, 2021
Don't Let Your Credit Card Rewards Expire
Travel

Don't Let Your Credit Card Rewards Expire

If your miles or points are expiring too soon, see if you can reset the clock by transferring some to another loyalty program.
October 28, 2021
Should I Use Credit or Debit?
Basics

Should I Use Credit or Debit?

Credit cards offer more protections and rewards, but debit cards reduce the temptation to overspend.
October 4, 2021