Every time you use your debit card to pay for purchases, the merchant must pay a “swipe fee” to the card issuing bank. The old formula averaged about 1.14 percent of the purchase price, and netted U.S. banks billions in fees. As of October 1, 2011, these fees have been dramatically cut by a new law contained in the Dodd-Frank Act. Now swipe fees are capped five percent of the transaction and a maximum of 21 cents. Some analysts predict that this will cost the biggest U.S. banks annual revenue of $8 billion.
So when was the last time big banks lost money without a fight?
Bloomberg and other news agencies are reporting that Bank of America is planning a $5 monthly fee for debit card use. Instead of getting their money from merchants, Bank of America will get it from its customers. The fee will apply any month in which the debit card is used for a purchase, and will not apply to withdrawals from a cash machine. The fee will be assessed whether the customer makes one purchase or ten. In other words, that $10 purchase could now cost you $15.
The $5 monthly usage charge would take effect early next year, and customers would be notified at least 30 days in advance of the change, said Betty Reiss, a spokeswoman for Bank of America. “If they don’t use the debit card during the month to make a purchase, they won’t incur the fee,” Reiss said.
Bloomberg reports that Wells Fargo is also testing a $3 monthly debit card fee in some markets. “We will continue to see more debit card fees in the months ahead,” said Greg McBride, senior financial analyst at Bankrate.com.
Predictably, the Bank of America debit card fee will not apply to wealthy accountholders with premium accounts. There are many bank fees that are directed at lower income families, including monthly or annual checking account fees, overdraft fees, overdrawn account penalties, and checking account advance fees. These fees account for billions each year in revenue and take money from the pockets of lower income people.
If you are struggling with debt and have too much month left at the end of your money, speak with an experienced bankruptcy attorney and discuss your options. Don’t continue to have your income drained by bank fees! Take control over your finances and build a better financial future today.