By: Neda Ghomeshi / Opinion Editor
With our debit cards, we have swiped our way through life. They are convenient, widely accepted and typically safe. Unlike a credit card, which offers a generous limit, a debit card does not lead us into temptation every time we go to the mall.
For a while, banks did not charge a fee for the use of debit cards ; however, that has recently changed. Now, most customers are required to pay an additional fee each month, if they choose to make a purchase with their debit card. This is an additional financial burden added to our college lives.
Recently, banks have been surprising customers with the unpleasant news of additional fees. According to the Wall Street Journal, Bank of America recently announced it will charge most customers who use their debit cards for purchases a flat $5 monthly fee. Although Citigroup is not charging for debit card use, they are raising banks fees by requiring a $1,500 minimum balance on basic checking accounts. Chase and Wells Fargo are also testing $3 monthly debit card fees in select markets.
This sudden desire to charge customers is not unwarranted, though. On Oct. 1, The Federal Reserve implemented a rule, which limits fees that card networks charge merchants to 21 cents per transaction — about half the average that retailers have paid in the past. In response to this new rule, banks are trying to make up some of the $8 billion they stand to lose. To banks, this is a solution to their loss – for customers like us, this is a new problem.
Although these charges have not been implemented yet, and banks are not releasing enough information, we should begin considering alternative ways to make our purchases to avoid these unreasonable fees. Even though these new charges are overwhelming, we can avoid them.
The fee is only applied if we make a purchase with our debit card, so we can still withdraw money from our account with no monthly charge. Students should take advantage of paying with cash.
Smaller banks and credit unions have not made any announcements regarding debit card fees. Actually, most credit unions are opposed to ever adding a debit card fee. Closing a bank account is a hassle, but worth the effort if the savings are justified, which is clearly the case here.
Many customers have already made the transition. According to Credit Unions Online, Paul B. Stull, senior vice president of strategy and branding at Arizona State Credit Union, reports an overall customer increase of 20 percent since Bank of America’s announcement. Stull said, “We have no plans to add a fee to our debit card.”
Nothing is finalized yet. In fact, Representatives Jason Chaffetz, a Utah Republican, and Bill Owens, a New York Democrat, plan to introduce a measure to repeal the rule required by the 2010 Dodd-Frank Act. Since most banks are only introducing this new rule to cover losses from the Dodd-Frank Act, if it is repealed, many of these recent possible charges may also be retracted.
As students, we are on limited budgets and are always trying to avoid fees. If banks decide to charge us for using our debit card, we have some options to avoid them.
“Econ with Neda” is an economics op-ed column that runs every other Monday.