Banks are looking for new sources of revenue now that federal regulations have reined in the amount they can earn from credit cards, overdrafts, and debit-card merchant fees. So the next time you get a letter or an e-mail message from your bank, don't be surprised if it brings news of higher fees, fewer rewards, or tougher account requirements. But you might be able to avoid paying more if you're vigilant, willing to change your habits, and ready to switch banks for a better deal.
The latest blow to bank profits, effective last month, is a federal rule that limits the so-called "interchange" fees large banks can charge retailers whenever people swipe their debit cards to pay for a purchase. The fees are now capped at 21 cents to 24 cents per transaction, about half the average amount banks had been charging. This change follows separate regulations that took effect in 2010, limiting the ability of credit-card issuers to raise interest rates on cardholders' balances and barring banks from charging overdraft fees in connection with ATM and debit-card transactions unless customers opt for overdraft protection.
Because of the new restrictions and a continuing weak economy, banks have lost billions of dollars in revenue—and they're taking steps to recoup some of that through new fees or reduced rewards for account holders. "We are taking a hard look at the fees and benefits of all our payment products, including debit cards," said Tara Burke, a Bank of America spokeswoman.
Even before the interchange-fee caps went into effect, JPMorgan Chase, USAA Bank, and U.S. Bank announced they would stop offering debit-card rewards for new or existing customers. And some banks are imposing more stringent requirements to avoid fees on checking accounts. A 2010 study by Bankrate.com found that 65 percent of the checking accounts offered by the largest banks imposed no maintenance fees, down from 76 percent in 2009. At many banks, fees are waived if customers maintain a minimum balance or set up direct deposit with their employers. Recent changes in free-checking requirements by Bank of America, Chase, Citibank, and Wells Fargo could result in more fees for those who are least able to meet the stricter requirements.
Consumers should also watch out for new charges. We've already seen new fees for:
Beginning Oct. 14, Wells Fargo began a test program that charges a $3 fee during any month in which customers in Georgia, Nevada, New Mexico, Oregon, and Washington use their debit cards.
Want to get your checking statement mailed to you? If you bank at TD Bank, you'll pay $1 a month for the privilege. Bank of America e-banking customers will pay $8.95 for any month they request a paper statement.
Bank of America e-banking customers also face an $8.95 charge during any month in which they make a deposit or withdrawal with a teller. PNC charges some customers $2 to $3 when they call a service representative to transfer money rather than doing so online.
Bank of America now charges some customers $5 if they lose their debit card. For overnight replacement, once provided at no additional cost, Bank of America now charges $20.
Chase charges $25 for closing an account within 90 days of opening it. U.S. Bank and PNC charge $25 if an account is closed within 180 days of the date it was opened.
First, it's important to stay on top of your bank's fee practices so it can't sneak new charges by you. Read all communications, even those small slips that come with your monthly statement (if you still get one in the mail) or notices when you log on to your account. A mailed notification might look like a promotion, but it could be an announcement of new fees or restrictions that will take effect automatically if you don't act. Read the fine print and determine what's most likely to affect your account. Ask about anything you don't understand. And review your bank statement every month for unexpected fees in case there's a new charge or other requirement you missed or misinterpreted.
If it's clear that the fees on your existing checking account are going up, consider these options:
If you're a longtime customer or have substantial deposits, see if you can work out a better deal or ask to have certain fees waived. It's worth a try.
Explore the bank's other account offerings. Maybe there's a lower-tier service that has fewer fees or restrictions.
If you're already paying fees for some services—like using another bank's ATMs to get cash—now is a good time to stop, since there's a chance you'll be paying more for the convenience. Instead of paying the foreign ATM fee, stick with your bank's network or ask for cash back when making a purchase with your debit card. If your bank adds requirements for free checking, such as direct deposit or higher minimum balances, consider making the change. Consolidating your accounts from multiple banks into just one or two might help you meet new balance requirements.
If you share an account with a family member, make sure you also share the strategies to avoid fees. Make a list of the changes that will probably affect your family the most and hand it out or post it on the refrigerator so no one forgets.
If your debit-card rewards disappear, try using a credit card for day-to-day purchases instead. Many credit cards, including some with no annual fee, offer cash-back rewards. And some pay rewards into your bank account instead of by check. For example, Bank of America recently introduced a Visa credit card that pays 3 percent back on gas purchases, 2 percent on groceries, and 1 percent on everything else. If you elect to have the rewards credited automatically to your Bank of America account, you'll get an additional 10 percent of the cash-back amount.
Local banks, credit unions, and online banks often have the best deposit rates and lowest charges. And smaller institutions aren't subject to the caps on debit-card transaction fees, so they might have less motivation to nickel-and-dime their customers.
There are still plenty of good deals available. For example, Ally Bank continues to offer no-fee online checking accounts that pay interest. And in July it announced its Ally Perks rewards program, which automatically deposits cash into customers' bank accounts when they use their debit card to shop at certain merchants. For most of last August, Ally cardholders who spent at least $25 at BestBuy.com or $50 at Target.com got $5 cash back.
Another example is the MasterCard debit card from the online bank PerkStreet Financial. The card pays 1 percent to 5 percent cash back on non-PIN purchases, depending on your account balance and when and where the card is used. PerkStreet's online checking accounts don't require a minimum balance and have no maintenance fees (though there's a $4.50 fee if there's no activity in your account during any given month).
Picking up a competitor's deal doesn't necessarily mean having to switch your current bank. For example, PerkStreet accounts, like those of other online banks, can be linked to existing bank accounts. But if you decide to close your bank account, follow the steps outlined in the box on the facing page for a seamless transition.
These tips can help you make sure the transition to a new bank or credit union goes smoothly:
This article appeared in Consumer Reports Money Adviser.