Mon, October 24, 2011
A number of banks are developing annoying new checking account fees. What’s a consumer to do?
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) was supposed to help consumers by eliminating unfair credit card practices. However, one less-known provision of the Act placed a limit on the so-called “swipe” fees that banks can charge merchants when their customers make a purchase with a debit card. The change is expected to reduce bank fee income by more than $6 billion annually.
Faced with decreased debit card revenue, some banks have starting looking for loopholes in the CARD Act. Since the law places no cap on consumer debit card fees, the practice of charging users of debit cards directly seems to be gaining momentum.
Bank of America has led the field, announcing that next year it will charge many of its customers a monthly $5 fee in any month during which they use a debit card, even if the card is only used once. While some “premium” accounts will be exempted from the fee, Bank of America is looking to staunch the anticipated loss of $2 billion in merchant fees by applying the fee to its standard account holders.
Other banks, including J.P. Morgan Chase and Wells Fargo have begun testing similar fees, and Alabama-based Regions Financial Corp has announced a $4 monthly debit fee.
The fees do not apply to ATM usage or credit cards. This has prompted some speculation that banks may see this as an opportunity to push customers toward greater use of credit cards, which are more profitable for most banks than debit cards.
Debit card fees are not the only problem. According to a recent survey by Bankrate.com, free checking accounts are becoming less and less common, with such accounts representing only 45% of non-interest bearing accounts (vs. 79% in 2009).
Is It Time to Find Another Bank?
Faced with rising fees of various kinds, you may want to consider switching banks. USAA Federal Savings Bank and Citigroup have responded to the Bank of America announcement by reiterating that they don’t intend to raise debit card fees. In addition, online banks or community banks eager for local business are another possibility.
Credit unions typically offer accounts with lower fees than banks, but you may not belong to a group that entitles you to be a member of any of the credit unions in your area.
Still, there are plenty of options. Bankrate.com has a helpful search engine that allows you to find banking options by specifying a few criteria. An even more powerful tool at FindABetterBank lets you to search bank options by describing your location, typical minimum balance, whether you need overdraft protection, which account features you want or don’t care about, etc.
Avoiding bank account fees is getting more difficult, but with a little effort many consumers can find a banking choice that minimizes or eliminates the cost of having a checking account.