How to Avoid Bank Fees

By Emily Driscoll Features FOXBusiness

New fees coming out of the banking industry have consumers up in arms concerning a common staple in their financial day to day lives: the debit card.

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Just days before the Durbin Amendment went into effect on Oct. 1, Bank of America announced it would charge consumers a $5 monthly fee for using their debt card. Part of the Dodd-Frank financial overhaul package, the amendment limits the fees that banks can charge merchants when a consumer swipes their debit card to 24 cents, from 44 cents.

Although it seems like only a few pennies lost on every swipe, the numbers will start to add up for the banks. According to the Heritage Foundation, the total potential loss could amount to $12 billion.

Banks have long opposed the amendment warning that if the fees were lowered, the difference would have to come from somewhere else.

The $5 fee is designed to make up for Bank of America's (BAC) loss of revenue. Experts note that that a customer making 25 debit card transactions a month would lead the bank to lose $5 it would have made before the Durbin Amendment. Bank of America is not alone: many of the larger banks, including Wells Fargo and Sun Trust, are making up for lost revenue by charging for debit card use, the cost ranging anywhere from $3 to $5 per month.

“Some people with this change aren’t impacted--they don’t feel that $5 is going to affect their budget or maybe with their financial situation they have a certain balance so that it doesn’t impact them,” says Mechel Glass, director of education at Credibility. “For others, if that $5 is going to impact them on a monthly basis, then it’s up to them to figure out which banking institution is going to work for them based on their lifestyle.”

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News of the $5 added fee, which goes into effect next year, didn’t sit well consumers, setting social media outlets ablaze with complaints. The number of debit cards in use in the U.S. is more than 530 million and according to the Nilson Report, which tracks the card industry, two out of every three times someone swipes plastic, it’s a debit card. 

What’s more is that experts warn that the fees won’t stop with debit cards.

“Big banks are going to try to increase fees anywhere they think consumers will take it,” says Dan O’Malley, CEO and co-founder of PerkStreet Financial

As banks have different policies, fee amounts and fee activation dates, credit card expert for Beverley Blair Harzog recommends that consumers stay informed and on top of the changes happening with your money.

“Maybe you will start getting charged for online checking accounts and you won't know it until you see that pop up on your statement,” she says. “Read everything so that you know what's going on with your bank.”

How to avoid fees

There are ways that bank customers can still make purchases without shelling out a monthly debit fee.

Consumers can switch to using a credit card, but not everyone is eligible for a card, and they can open the door to overcharging and piling up of debt. Banks have increasingly made credit cards more appealing to those who don’t want to use debit with promises of rewards programs and cash bonus offerings.

Using your credit card may help you avoid any monthly fees, but you should pay off your bill in full every month to ensure you don’t succumb to the slippery slope of credit card debt. 

For those thinking that using a prepaid debit or credit card is a better option, Harzog cautions that a $5 monthly fee is usually much cheaper than the fees associated with prepaid cards.

Glass points out that although the purchasing process might take a little more time, writing a check is still a valid source of payment at many businesses.

For people who keep themselves on a budget by taking cash out periodically, the debit card fee will not affect them at the ATM.

“The $3 activity fee will be charged only once a month when customers make a purchase or payment using their personal or business debit card, check card or ATM card linked to their Wells Fargo business or personal checking account opened in Georgia, Oregon, Nevada, New Mexico and Washington,” says Lisa Westermann, assistant vice president of public relations for Wells Fargo & Company.

For consumers not willing to part with their debit card, experts suggest researching local and regional banks and credit unions that don’t charge patrons monthly fees to use their debit cards.

If you decide you want to leave your bank, you should take some precautions with your old account. Glass advises customers to leave your account open long enough to clear any outstanding charges or checks, but to make sure you close it after everything has gone through.

“We’ve had clients that have come to us that opened up a new account with a banking institution and left the old account open but there was a fee because they didn’t have a minimum balance in the account, so their account was getting charged for these fees and there wasn’t enough money in there,” she says. 

Although changes in the financial realm may cause consumers to have to shell out more money or make a switch, the experts say that the changes may have a positive outcome as well. Harzog explains that the economic climate in general along with new regulations in the banking system is making the average  consumer more aware of what’s going on and how it impacts them.

“Hopefully they're feeling a little bit more empowered that yes, there are a lot of options out there and they can make choices,” she says. “Just because you've been with a bank for a long time, it doesn't mean you have to stay. It's your choice--you have the power to control your financial life. 

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