4 Ways to Beat Debit Card Fees


Several banks just announced new monthly fees for debit card users. Fortunately, there are plenty ways to avoid them. (See also: That Sneaky Bank Almost Got Me)

Until this month, the large swipe fees they charged merchants made debit cards a huge profit center for banks. They were so profitable, banks were offering all manner of perks if you'd promise to use your debit card at least 5, 7, or 12 times a month.

Those days are gone. As of October 1st, the swipe fee is limited to just 24 cents. That's still plenty of money to make the debit card business profitable for the bank, but it's not going to fund the huge bonuses that bankers have gotten used to. So, they're looking for other sources of money.

Once source they looking at is a monthly fee. Bank of America is going to hit your account with a $5 fee every month that there's even one debit card transaction. Wells Fargo and Chase are testing monthly fees as well.

You don't need to pay those fees. Here are four ways to avoid them.

1. Change Banks

The big money-center banks don't want your piddly little consumer banking business anyway. They make their money from packaging corporate finance deals, selling credit default swaps, and creating collateralized debt obligations. They figure the plain-jane transaction business of debit cards is beneath them (unless there's some serious fee income involved).

Instead of a big money-center bank, consider:

Smaller Banks

The medium-sized regional banks probably aren't much better than the money-center banks — they'd also rather be pocketing a million-dollar fee for arranging a standby letter of credit than handling your checking account. But, as the banks get smaller, they start taking real interest in serving their smaller customers. There are plenty of small, local banks that don't charge a fee for checking accounts, with or without debit cards.

Credit Unions

Credit unions are owned by their members. Serving your financial needs is what they're all about. They're a lot less likely to charge a fee than a bank is.

Brokerage Firms and Other Non-Banks

If you're wealthy or broke, this may be the option for you.

If you're wealthy, get a cash management account at a brokerage fund. They'll issue you a debit card that will give you access to your wealth, and they won't charge a fee for the card. (Big-name brokerage firms charge a hefty fee for the account; discount brokers tend not to.)

If you're broke, get a reloadable debit card. They have fees as well, but the fees are for specific services (like cashing a check, checking your balance, or using an ATM). Many now allow one free ATM withdrawal per month, and most charge no fee to accept direct deposit. If you track your balance yourself (so you don't need to check your balance), you can use them in a way that's practically fee-free.

2. Use a Credit Card

Just about any place that will take a debit card will take a credit card as well. There are a few exceptions, but not many.

Of course, it's easy to get over your head in debt. But that's not the credit card's fault. If you can use a debit card and not spend more than you have in your checking account, you can do exactly the same thing with a credit card. The only difference is you have to do it yourself. This may be the right choice — if you're ready to control your spending without training wheels.

3. Pay Cash

Go totally old school and pay for things with money! Yeah, plenty of people say they spend more if they have cash in their pocket. I say, get over it. You have exactly the same amount of will power and self-control with cash in your wallet as you do with a debit card.

4. Write a Check

Actually, even I don't do this any more. I still pay bills by writing a check (really!), but I can't remember the last time I wrote a check at a store. And yet, it can be done. It used to be done routinely.

This is hardly the end to the possibilities. The transaction business is about to go non-linear. Paying online, or with your cell phone or your mobile device, is already here, and it's just going to get more common.

With all those ways to avoid debit card fees, there's no reason to pay one.

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Meg Favreau's picture

I'm currently a Wells Fargo customer (tossed over from Wachovia), so I have a close eye on this, especially since I often use small debit card purchases to get cash back when there isn't a Wells Fargo ATM around. Trying to find a credit union is definitely on my mind.

Philip Brewer's picture

Credit unions are great—I always had a credit union account until I moved to Champaign-Urbana. (Here I found a small bank that provides all the services I need, and I ended up going that route.)

The key insight is realizing that the big money-center banks don't care one bit about individual account holders: you're really just an expense to them.

Guest's picture

I have been a Credit Union member for 40 years. In contrast to some of my banking investment experiences I have always found credit union staff to be friendly, knowledgeable and very up front - with my interests in mind. I have all my Credit Union now.

They do exist solely to serve their members and not to pay high dividends to share holders. The profits are returned to members, offering higher deposit rates and lower rates on loans. While bank accounts in Canada are now insured for $100,000, here in British Columbia credit union accounts are covered for the entire amount.

Guest's picture

I find this article disappointing, since the title led me to believe it would discuss methods of avoiding debit card fees, and 3/4 solutions were to not use debit cards. I suppose the title is technically accurate, since without a debit card, you won't have fees, but I find it misleading, and again disappointing.

Philip Brewer's picture

Sorry you didn't find it helpful! Maybe this would be useful:


It's a page for a group that advocates moving your money away from money-center banks, but the politics of that are neither here nor there. If you follow the link for "Find a bank/credit union," it'll offer you two different tools for finding local (i.e. not money center) banks and credit unions—which are a lot more likely to offer fee-free debit cards.

Guest's picture

I love my bank, Southern Community. Their website is small enough to care dot com, and they are. I've been with them for 12 years, even after moving 600 miles away. When I got married, my wife joined them too. We have to use our ATM card 10x a month, and for that, we earn interest and they refund ATM fees any other bank has charged. So this way, I can use any ATM 600 miles away. Since I was a little kid, I've known BofA charged the most fees, so I stay away. Small banks all the way!

Guest's picture

My bank, B of A, has already announced there are fees coming. Ugh! I'm going to try and stick with your third suggestion. I'm one of those persons that hates carrying cash and I use my debit for everything so this will be an adventure. Hopefully carrying cash will also help me save money as it will make me more aware of what I have. Great suggestions!

Guest's picture

Customers who have premium accounts with BofA will not have to pay the $5 monthly fee. I'm not going to move my account for $3, I have a Wells Fargo Account, but I'll probably close my BofA account and move it to Wells Fargo. It's not that big of a deal since I have bill pay and can change account numbers easily.

Guest's picture

As far as using a check, people may want to be aware as checks have routing numbers on them. They were fine to use before Internet allowed online payment of bills but if your account # and routing # get into the wrong hands you could have some major problems.

Philip Brewer's picture

It's always a hassle when someone posts fraudulent transactions to your account, but the solution is not to try to keep your account number secret. That's hopeless.

The solution is to check your statement, and report any fraudulent transactions to the bank. Happily, there are fairly strong laws requiring that they give you your money back, if there's a fraudulent transaction.

I wrote about this a while back in this post:


Guest's picture

I do not understand people that stick with these banks. Please find a credit union and never pay another "convenience" fee again.

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