Debit Card Users Face New Fees
By Michael Germanovsky
During the financial crisis, many consumers relied heavier upon their debit cards as opposed to their credit cards. Because a debit card is linked directly to the cardholder's checking account, and the funds are deducted per purchase, it makes budgeting easier for many because it limits or outright eliminates their ability to overspend.
Also, for those who got themselves deeply into debt via their credit cards or by another means, and suffered a severe blow to their credit score as a result— a debit card may be one of their only plastic payment options. As lenders have developed stricter lending practices in response to the nationwide economic downturn, many people who apply for a credit card have discovered that they aren't as easy to obtain as they once were.
Now it seems that banks are doing what they can to drive consumers away from using debit cards. Because of the Durbin Amendment to the Dodd-Frank Financial Reform Act that went into effect on October 1, the fees that banks are able to collect from merchants per debit card transaction have been capped at roughly half the amount they were previously.
"Banks that try to make up their excess profits off the backs of their customers will finally learn how a competitive market works," said Senator Dick Durbin, D-Ill, as reported on Foxnews.com.
Yet this seems to be exactly what most banks are doing. In order to make up for lost revenue, many banks, such as Citibank, are restructuring the fee system attached to their accounts. Come December, Citi accountholders will have to either maintain higher minimum balances, pay more bills online, enroll in direct deposit or a combination of all three in order to avoid being charged a monthly fee on their account. The fees themselves are also higher than before.
Still other banks are opting to charge their customers a monthly fee for using a debit card to pay for purchases. Ranging between $3 and $5 monthly, these fees are being employed by banks such as Wells Fargo, Regions Financial and SunTrust. America's largest bank by deposits, Bank of America, has also made the decision to charge customers a $5 fee each month they use their debit cards to make purchases. ATM usage will not incur the new monthly fee.
A spokeswoman for Bank of America, Anne Pace, stated to Bloomberg News, that “the economics of offering a debit card have changed with recent regulations, and we've decided to introduce a monthly fee for customers who use their debit cards for purchases,” as reported to Ibitimes.com.
Durbin had this to say about specifically about BOA's new debit card usage fee, according to Foxnews.com, "It's overt, unfair and I hope their customers have the final say.”
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
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