How to Avoid New Debit Card Fees

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NEW YORK (MainStreet) — Unhappy about new federal rules such as the curb on overdraft charges, banks are looking for ways to make up the loss. But in many cases customers have counter-moves available to them as well.

In the latest fee salvo, Bank of America (Stock Quote: BAC) is starting to road-test accounts with higher fees for customers deemed not profitable enough, such as those with low checking account balances, according to Bloomberg News. Customers can avoid the fees if they have more than one account or use enough bank services.

But that won’t work for the customer who only needs a simple checking account and debit card for paying bills, making purchases and withdrawing cash from ATMs. What’s this minimalist customer to do?

The first step, of course, is to see if there’s a way to make the bank’s new terms palatable. You might be able to reduce or eliminate fees by consolidating services from various financial institutions.

For example, with fees going up it may not be worth it to use a checking account at one bank and have a money market or savings account at another if there’s little difference in interest earnings.

Also, the bank with your checking account may offer a perfectly good credit card. Even if the card rate is higher than you pay elsewhere, that would not matter if you pay your balance off during the grace period each month, avoiding interest charges.

If consolidating accounts won’t work, shop for a bank that offers the services you need with the lowest possible fees. That sounds easy, but there’s a problem: Even if you don’t need to go to the bank very often, the cheapest bank may not have many ATMs in your area.

Typically, one of the minimalist bank user’s chief goals is easy access to cash. Getting cash from your own bank’s ATMs is free, while you may pay several dollars for using another bank’s machines.

The cost can be kept down by making fewer withdrawals, getting more cash each time.  ATMs charge a flat rate, such as $1.50 if you’re not a customer, plus $2 charged by your own bank for using another bank’s machine. On a percentage basis, that’s brutal if you withdraw just $20 over and over. It wouldn't be so bad if you withdrew $200 twice a month.

Another technique is to get cash back when you use your debit card at a grocery store, pharmacy or other retailer. There’s no fee for that at all.

Next, look for a no-fee ATM, found at some convenience stores. Services like MoneyPass and Allpoint offer fee-free ATMs and online and mobile machine locators. Many credit unions belong to the co-op  ATM network, which offers fee-free machines for account holders.

Finally, consider an online bank like Ally, which allows you to use any ATM with no fee and reimburses any fee charged by the bank whose machine you use.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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