NEW YORK (CNNMoney) — Get ready for a new wave of bank fees. Bank of America will begin charging a flat $5 monthly fee at the beginning of 2012 for customers who make debit card purchases, but customers with certain premium accounts will be exempt from the charge.
NOTE: It does not matter if you select “debit” or “credit” at the point of sale. Consumers who do not use their card to make purchases will not be assessed the fee. There is no new fee for ATM transactions.
The move coincides with the implementation of new rules, the Durbin Amendment, limiting the revenue banks will be able to get from merchants. Beginning this weekend, a cap on the fees banks can charge retailers every time customers swipe their debit cards will take effect. While banks used to charge an average fee of 44 cents, now the maximum fee is only 21 cents. This is expected to cost the banking industry billions of dollars. The Federal Reserve introduced the cap this summer, despite protests from many financial institutions.
According to Philly.com, without the rules, the Fed had said that fees averaged 44 cents per transaction. The new rules cap debit-card transaction fees at an average of 24 cents:
That includes a flat 21-cent transaction fee, plus a fee of 5 basis points – one-twentieth of a percentage point – based on the size of a transaction, which can be charged only if a bank provides fraud-prevention services. Use your debit card for a $5 purchase, and BoA will collect about 21 cents from the merchant. Use it for a $500 purchase, and BoA will collect about 46 cents.
If you are unhappy with the fee, you may want to consider your own alternatives, especially at smaller regional banks or credit unions. Shop around, and you may find some surprises. For instance, to compensate for not having a huge network of ATMs, one of Bank of America’s key competitive advantages, some small banks offer to absorb some costs of out-of-network withdrawals. Valley Green Bank says it offers up to four out-of-network transactions per month to “free checking” customers. Some larger banks may eschew debit-card fee increases in an effort to capture a larger share of customers.
If you are thinking of switching, Consumers Union offers advice here, including a link to a PDF guide on how to change banks smoothly in an era when many people rely on preauthorized debits to pay key bills.
According to CNNMoney, Bank of America may get the last laugh. Even though debit cards have been rapidly replacing credit cards as the preferred payment method over the last few years, debit card fees are suddenly making credit attractive again, and that means a rise in credit card debt is likely to follow. With the interest and fees associated with credit cards, the banks are likely to recoup lost debit card fees.
For full articles see Bank of America to Start Charging $5 Monthly Debit Card Fee by Blake Ellis for CNN, Angry about new debit-card fees? Switch banks by Jeff Gelles for Philly.com and Bank of America May Get the Last Laugh by Jessica Dickler for CNNMoney.