Does this new debit card rule mean more bank fees?

Does this new debit card rule mean more bank fees?

The effect of a new debit card rule that reduces the “swipe fees” that merchants have to pay banks (nice for them!), may trickle down to you… and increase your fees to banks (not so nice for you!), whether you use your debit card or not.

Here’s life before the rule: Let’s say you’re buying lunch. Every time you swiped your debit card to pay for a turkey wrap, the deli paid your bank a “swipe fee” of about 44 cents per transaction. To help pay for those fees, the deli owner may have hiked sandwich prices to cover his expense.

But on October 1st, the new rule, which is part of the Dodd-Frank Financial Reform Act, kicked in: “Swipe fees” for the deli and any other merchant will be capped at 21 to 24 cents per transaction—half the old cost. So Joe the deli owner gets to pocket the difference and maybe even lower his prices down the line—hey, a girl can dream! (But, more likely, he may not let you buy small-ticket items with a debit card.)

Since the banks won’t make as much from “swipe fees,” they’ll look for ways to recoup the dough, such as charging customers—that means us—more for products. Bank of America will charge customers a $5/month fee for debit card purchases. Similarly, Wells Fargo is testing a $3/month fee in five states, starting this month. And free checking will soon be a thing of the past: Only 45 percent of banks offer it, down from 65% last year and 76% two years ago, according to a new survey from Bankrate.com.

But you can avoid these fees. Be your own watchdog and fight back! If your bank charges you a fee for paying with your debit card, pay in cash! If your free checking suddenly spikes to $8/month, call and ask what you can do to avoid the fee (some banks will drop it if you sign up for direct deposit). Or, shop around on bankrate.com and see if there’s a better deal out there (community banks and credit unions often have fewer fees). Then, use that as a bargaining chip, or consider switching banks. Your job as a savvy consumer is to get the best deal and reduce your fees.

Has your bank begun charging more for debit cards or checking accounts?

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