If you're a
Bank of America
) , or
) customer, changes may be coming to the way you bank. Not a
customer of one of these giants? Odds are, you won't be off the
How it happened
Two years ago, credit-card debt writeoffs reached an all-time
high, and banks heavily encouraged debit-card usage through
incentives like rewards programs. Now, a new law reduces how much
large banks can charge merchants each time you use your debit
card. Called a "swipe fee," the charge is for non-ATM
transactions at retailers, and the law applies to all banks with
more than $10 billion in assets. As a result, large banks are now
aggressively promoting credit-card rewards programs, eliminating
debit-card perks, and increasing fees on checking accounts to
recoup lost income from swipe fees.
What it means for you
Beginning next year, Bank of America will charge customers $5 for
each month they use their debit cards. JPMorgan Chase and Wells
Fargo are rolling out charges as tests in certain regions. Other
banks, like SunTrust, will be charging only on its free checking
accounts. Chase and
) have rolled back or cancelled reward programs for debit-card
(C) will be raising its minimum balance requirements and monthly
maintenance fees by the end of the year.
So if you want to avoid surprises, here are some tips you need
1. Review your statements carefully
Understand what your bank will charge (if anything) and how and
when it will appear on your account. Your bank may not increase
debit-card fees, but it might add a fee to what was previously a
free checking account or impose new minimum balance restrictions.
Fees could be imposed either for-use (i.e., each time you use
your card or account) or on a monthly or annual basis.
Everything's up for grabs.
2. Use your points while you can
If your debit card has a
program, find out whether it's being cancelled, and what, if
anything, you'll be able to do with your points. SunTrust
cancelled its program for new customers earlier this year, and
points accumulated by existing customers will expire in January.
Points earned by JPMorgan Chase customers expired this past July.
Citi recently notified customers that it is also ending its
If you've paid a fee to participate in a rewards program, you
may be eligible for a partial prorated refund. Check with your
card company to learn more.
3. Compare rates
Not sure whether your bank's fees are competitive? Curious what
your friend at another institution might be paying? A website
such as Bankrate can help you see what fees banks are charging on
checking accounts and credit cards.
4. Track all your accounts online
Use a service such as Mint.com to track all your accounts in one
place, and set up an alert specifically for bank fees to ensure
you're not caught off-guard.
5. Upgrade to a premium, fee-free account
Several banks waive fees for customers retaining a higher
balance. Consider combining multiple checking, savings, and/or
money market accounts to ensure that your ccount meets any
6. Switch to a credit union or a small regional bank
Small banks and credit unions traditionally have lower interest
rates and fees than commercial banks, and they aren't affected by
the new law on swipe fees.
Is switching to credit-only for you?
Another option is to stay with your bank and reduce or eliminate
your debit-card usage. Before you do that, here are some things
1. Even if you never use your debit card, swipe charges can
show up in other ways, including as a monthly charge on your
once-free checking account.
2. Be realistic about your habits. If you switched from credit
to debit to
reduce your debt
, switching back might not be the way to go. You won't save much
if you're carrying a balance on a high-interest credit card.
3. Don't be wooed by shiny points programs. Airline miles are
nice, but if you're spending more on interest than you would on a
ticket, it's not worth it.
4. Take a realistic look at how often you swipe and whether
the rewards outweigh your costs.
5. Be sure to avoid the
most common credit mistakes
The Foolish bottom line
If you don't use your debit card very often, are with a bank that
doesn't charge fees, or already manage your spending and rewards
responsibility with your credit card, this change probably won't
affect you much. But if you're the type who relies heavily on
your debit card, now might be the time to make a change. Switch
to an account or institution with no or fewer fees, pay cash more
often, or charge responsibly.
Keep in mind that even if you switch back to a credit card,
your credit card may soon be worthless.
Check out this video
to find out why. It's free for Fools.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights
reserved. The Motley Fool has a