Post image for 6 Ways to Fight Back Against New Debit and Checking Fees

6 Ways to Fight Back Against New Debit and Checking Fees

by on October 10, 2011

You lost your free checking. You lost your rewards checking. And now you’ll lose your free debit card.

Bank of America stole the spotlight with its $5 debit usage fee, but Chase and Wells Fargo are piloting similar fees right now. Citibank tried to claim the high ground for avoiding the debit card fee, but just this week raised both its checking account fees and the minimum balances required to avoid them.

Though outrage rises with every new fee, don’t expect banks to back down anytime soon. The Durbin Amendment’s regulations make debit cards much less profitable, to the point that many banks would rather you close your account than pay the fees to keep it open.

That’s not to say you’re without options: Ditching those debit fees is easier than you think. Here are six of our top suggestions for a better banking experience.

1. Get a checking account with debit rewards

Why get a debit card you have to pay for when you can get a debit card that pays you? Debit rewards programs are still alive and kicking; they’re just not at the big banks anymore. One of our favorite online checking accounts, PerkStreet, is a great example.

No matter how much money you have in your account, you’ll get some cash back for your debit card purchases. You’ll earn 1% back if your balance is less than $5,000 and 2% for higher balances. You’ll also get the 2% for the first 90 days your account is active, regardless of your balance. There’s no monthly fee ever (unless you keep your account inactive for an entire month), no minimum balance requirement, and no ATM fees as long as you get your cash from on of the 37,000 ATMs affiliated with the STAR network.

2. Put your money in a credit union

Who says you have to do business with a profit-motivated bank? Credit unions offer all the same services as a bank with one major difference: they’re not-for-profit cooperatives owned by their members, meaning their customers, meaning you.

A credit union’s profits are returned to you in the form of rewards, low fees, and low interest rates on loans, instead of going to faceless shareholders. Credit unions are far more likely to offer free checking, as almost all of them are exempt from the Durbin Amendment’s debit swipe fee cap. They don’t blow a lot of money on “This is Peggy” commercials though, so you’ll have to check out our credit union finder to find the best credit union near you.

3. Bank with your brokerage

If you have any accounts with a brokerage, like a 401k or IRA, find out if you can bank there too. At Charles Schwab, for example, you can link a high-yield Investor Checking account to any established brokerage account. While a high-yield checking account technically earns interest, the rate right now is barely noticeable – as of October 7th, 0.2%. But the account also charges no monthly fees, refunds ATM fees, charges no foreign transaction fees if you need cash abroad.

Fidelity’s Cash Management account is a brokerage account that functions like a checking account. You can write checks, withdraw money from ATMs, pay your bills and transfer funds with no fees. Like the Charles Schwab account, it earns interest, refunds ATM fees, and must be linked with a brokerage account.

4. Find a “simple” bank

All of the problems with traditional banks and the financial system over the last few years have led entrepreneurs to take notice and step into the banking realm. Startup banks are now launching to solve the problems with fees and bank customer service, taking advantage of web and mobile technology, and shaping their business plans accordingly. PerkStreet Financial is one such startup; BankSimple is another.

While not a bank in the tradition sense, it partners with already-established banks to offer checking accounts, debit cards and other services. They promise no overdraft fees, no late fees, no “hidden” fees, and best of all, they’ll automatically shift your money between accounts to take advantage of the best interest rates. Since BankSimple doesn’t have to handle cash, they can focus their efforts on customer satisfaction. BankSimple hasn’t launched yet, but they have promised a 2011 release (before many debit fees go into effect), and you can pre-register for a beta account on their website.

5. Put all your eggs in one basket

Many banks with monthly maintenance fees will waive them if the total amount in all qualifying accounts exceeds a certain threshold. Citibank, for example, sums up checking, money market, and savings accounts; outstanding or unpaid mortgages, personal or credit card debt; and more. Bank of America counts your savings, investment CD and IRA accounts towards the monthly requirement on some accounts. It also considers outstanding loan balances and credit card debt, but the requirements are often higher.

So if you have a mortgage, HELOC, or auto loan at any of the big banks, you can avoid any extraneous checking and debit fees by moving your checking account there as well.

6. Pay with a credit card, but treat it like a debit card

As your checking account gets ever pricier, you can consider using your credit card more often. Using them wisely can build up your credit score, which in turn will give you access to better credit card terms down the line. As an added bonus, you aren’t liable for any fraudulent charges if your credit card is lost or stolen – the protections on debit cards aren’t always as strong.

To avoid high interest charges, you have to pay off your balance in full, so pretend it’s a debit card and get in the habit of paying it off weekly instead of monthly. This is crucial – imagine you had an interest rate of 12% (on the low end). If you carry a balance of $500 for just one month, you’ll pay as much in interest as you would with a BofA debit card fee.  For recommendations on which card would be best for you, check out our list of the best credit cards.

Checking Account Fees at a Glance

Checking accounts with monthly fees and debit card fees

Account Name Monthly Fee Ways to Avoid Fee Debit Usage Fee Rewards
Bank of America
My Access Checking
$12 $250+ direct deposit OR $1,500 average daily balance $5 (2012) None
Wells Fargo
Value Checking
$5 $250+ direct deposit OR $1,500 average daily balance $3 (Pilot) None
Chase Total Checking $10 $500+ direct deposit OR $1,500 average daily balance $4 (Pilot) None

Checking accounts with monthly fees, but no debit card fees

Account Name Monthly Fee Ways to Avoid Fee Rewards
US Bank Easy Checking $6.95 (e-statements) $8.95 (paper) $500+ direct deposit OR $1,500 average daily balance None
Citibank Basic Checking $10 $1,500 average monthly balance OR direct deposit AND bill payment None
TD Convenience Checking $15 $100 minimum daily balance None

Checking accounts with no monthly fees and no debit card fees

Account Name Monthly Fee Debit Usage Fee Rewards
Schwab Bank
High Yield Investor Checking
None No 0.2% APY, variable
PerkStreet Rewards Checking None No 1-5% rewards
Lake Michigan Credit Union
Max Checking
None No 3% APY up to $15,000
Consumers Credit Union
Free Rewards Checking
None No 3.09% APY up to $5,000

*Rates current as of October 2011

Looking to save money on bank fees?
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  • Roy

    If you don’t want to change banks, consider obtaining a PayPal debit card, and making your checking account the backup funding option.

    You can then use the PayPal card as a MasterCard (no money required in your PayPal account), and it will draw from your checking account with no fee. What’s more, if you make sure you process your transactions as credit (no PIN), you’ll earn back 1% cash monthly from PayPal. Been doing this for a few years, now, and have so far found no catch. You even get a day or two float from the time of your transaction to the time it draws from your checking account. This, of course, could be a catch if you try to abuse that feature…it would result in NSF fees if you don’t have money to cover it.

    As long as you use your PayPal card in lieu of your bank’s debit card, I don’t believe you will incur fees.

    • http://www.nerdwallet.com/ Tim

      Awesome advice, thanks!

    • Fake

      Terrible advice.

      As part of the sign up you have to agree to let PayPal debit anything they feel like from your account.

      They are not a bank and so don’t have to abide by bank rules, etc.

      • http://www.nerdwallet.com/ Tim

        Can you give an example of what you’re talking about, for anyone else who might be reading?

      • Roy

        I base my advice on several years of experience, rather than nebulous fears. In that time, PayPal has not made any charges against my account based on “what they feel like.” Doing such at thing would be foolish move for a company that clearly has legitimate ways of making money, as they do every time I swipe my card.

        Further, you can limit the amount that will be authorized from your backup funding method in a given period of time.

  • http://twitter.com/DivaODoom Diva O’Doom

    I have a Perkstreet account that ROCKS!! I use ING as well and love them, but since they recently got bought out by CapitalOne, I started the Perkstreet account just in case. I have a PayPal account with a debit card too. I’m keeping my Chase account, just until ING or Perkstreet get photo deposit of checks functionality. Once they get that – OR if Chase gets stupid and tries to charge me for my ATM card – I’m dumping Chase and I will not look back.

  • Peter Robinson

    I have a Global Cash Card, issued by the First Citizen Bank. I have it as a convenient way to deposit my paychecks & recommended by my employer. However their fees are outrageous. For example, I was .02 cents over my balance and was charged $15 dollars!!! Also I wanted to withdraw $40 dollars and had 39.98 on hand and was charged twice, once for the nsf fee and second by the bank atm fee. total charges $2.95. This has caused me to spend about $20 in fees a month on top of their 9.95 monthly fee. do not have money to spare like this, so I will change banks soon. Thank you. Peter Robinson, Medford, Oregon

  • Julie

    I have a checking and savings accounts with a credit union for over tweenty years. One in New York and now one in Georgia.I have never had to pay for using my debit card or to write a check. A credit union is just like a bank just not as “greedy”. I love the credit union and will always tell everyone that is the way to go. Your money is safe with them.

  • http://twitter.com/GregStanski Greg Stanski

    I would argue that debit cards are still the better card option for college students than credit cards, even though banks are spending heavily to convince you otherwise (http://blog.unibulmerchantservices.com/banks-pay-73m-in-2010-for-issuing-credit-cards-to-college-students).

    Using debit cards teaches you how to use money responsibly, because you spend what you’ve already deposited into your bank account. Even peer pressure cannot force you to spend more than that, which is not at all the case with credit cards and we know how easy it is for a young person to get in huge debts. The lesson is well worth $3 or $5 a month.

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