— The nation’s big banks have backed down. They’ve pulled the plug on their ill-advised plans to charge customers to use their debit cards.
On September 29, Bank of America (the second largest bank in the country) set off a wave of negative publicity when it announced it would start charging a $5 monthly debit card fee next year. This week, BofA revoked the fee, the last major institution to do so.
In a statement announcing the about-face, Bank of America executive David Darnell said, “We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee.”
But for many people, the damage was already done. The idea of being charged for a service that has always been free – accessing your checking account with a debit card – really hit a nerve.
Saturday is Bank Transfer Day, but hundreds of thousands of people across the country have already made the switch, moving billions of dollars to credit unions and community banks.
The Credit Union National Association (CUNA) surveyed 5,000 credit unions across the country. The results, released yesterday, show that at least 650,000 people joined credit unions since Bank of America announced its now-rescinded debit card fee.
CUNA estimates that credit unions have added $4.5 billion in new savings accounts. This money is from new members and existing members who moved funds from other financial institutions.
At BECU, the largest credit union in Washington state, membership skyrocketed last month. In an average month, between 6,000 and 7,000 new members join BECU. In October, approximately 16,000 people signed up.
"We are delighted that consumers are beginning to discover the value that not-for-profit, member-owned credit unions can provide and the principles by which we are founded on," says Gary Oakland, President and CEO of BECU.
Stay alert for future fees
The country’s big banks will lose billions of dollars a year because of new federal regulations that dramatically lower how much they can charge a merchant when you use your debit card to buy something. As of October 1, this “swipe fee” went from an average of 44 cents per transaction to no more than about 24 cents.
"There are multiple levers that banks can pull to recoup the revenue lost through regulatory changes, and the debit card fee was only one of those levers,” says Greg McBride, chief financial analyst at Bankkrate.com. “Consumers are not out of the woods on fees as we'll see a continued escalation in other areas."
McBride says the banks could increase overdraft fees, ATM surcharges, monthly account fees and balance requirement. They could also reduce interest rates on bank deposits.
Think before you act in haste or anger
Changing banks can be a bit tricky if you have automatic withdrawals or deposits set up.
“You need to figure out what's going in and what's coming out on a regular basis and start to make your plans so that you are able to time your changes in a way that doesn't cause a headache for you in the long run,” says Norma Garcia of Consumers Union, publisher of Consumer Reports. “But it can be time well spent if you're able to find the right institution to fit your needs at a price that fits your pocketbook.”
Be sure to check credit unions and small community banks because they tend to have fewer fees. And when there is a fee, it tends to be lower than at a big bank. Credit unions also tend to pay higher rates on deposits.
Bankrate’s 2011 Checking Account Survey, conducted in August, found that 76 percent of the largest credit unions offer a free stand-alone checking account. Only 45 percent of the nation’s banks still do that.
You may want to consider an Internet-only bank. While you may sacrifice convenience with a virtual bank, the rates they pay on deposits tend to be higher than what’s offered by traditional banks.
The smart way to change
This seven-step checklist was put together by Consumer Reports.
Step 1: Open your new bank account with a small deposit.
Step 2: Make a list of all the automatic payments and deposits that are scheduled to go in and out of your old account each month.
Step 3: If you have direct deposit, ask your employer to reroute your paychecks to your new account. Find out what date the first deposit will occur.
Step 4: Once you know the date, reschedule each automatic payment or debit to come out of your new account. Make sure to ask what date the change will apply.
Step 5: Leave a small amount of cash in your old checking account for at least one more month.
Step 6: Once you’re sure all automatic payments and all direct deposits are coming and going from your new account, electronically transfer the final funds from your old account into the new account.
Step 7: After the transfer clears in your new account, follow the procedures for closing an account at your old financial institution. Make sure to obtain written confirmation that your account is closed.
You’ll find more details at Defend Your Dollars, a site run by Consumers Union.
ConsumerMan Tip: Be sure to ask a lot of questions about fees, penalties and minimum deposit requirements from any institution you may be considering.