Students with debit cards may have to stop before they swipe – or risk incurring new monthly fees.
The changes follow the passage of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, a controversial piece of financial reform. Starting Oct. 1, the Federal Reserve capped the “swipe fees” banks can charge retailers for debit card use. Merchants now only pay 21 cents per debit transaction, down from the former average of 44 cents, according to a Federal Reserve press release. The catch? Banks across the nation are putting the costs on their customers.
Starting in early 2012, Bank of America will charge debit card holders five dollars for every month they pay using their plastic, said Betty Riess, the bank’s spokesperson. The charge will not apply to ATM transactions. Furthermore, customers will not be charged for months they do not make purchases with their cards.
“We evaluated the options, and this seemed to be the most transparent because customers know exactly what the cost is and how they can avoid it,” Riess said. “They can make choices whether they continue using the debit card for purchase or use other options such as getting cash at the ATM.”
But for many college students, debit cards offer the convenience and security carrying cash doesn’t. McCormick sophomore Simon Yang said he uses the debit portion of his Bank of America joint debit/credit card two to three times each week to buy groceries and CVS essentials. Yang said the additional monthly fee is unfair to customers.
“It’s just another strategy to make money,” Yang said. “When you think about it, five dollars a month is kind of expensive. It’s a scheme.”
Rather than turning to the ATM, Yang said he will use his credit card more often next year. Still, he said he’ll have to be more careful managing his money without the debit option.
“If you use your credit card, it’s easy to go over what you can pay for,” he said. “But if you use your debit, you know your limit.”
Bank of America isn’t the only company responding to the cap. Citibank announced it will offset the new costs by charging customers fees each month their checking account balances are below a certain amount. NU students with U.S. Bank checking accounts linked to their Wildcards can rest easy for now: the bank has “no immediate plans” to charge more for debit use, U.S. Bank spokesperson Lisa Clark said in an email. Meanwhile, Wells Fargo and Chase are testing out monthly charges of three dollars.
Communication senior Dana O’Brien, who uses her debit card for both in-store and ATM transactions, said Chase’s proposed fee isn’t enough to make her switch banks.
“If it were something as little as three dollars, it sounds like it wouldn’t be a nuisance,” O’Brien said.
Still, the swipe fees may be the final straw for students already unsatisfied with their banks. Communication junior Jennifer Keats-Snow said she has considered leaving Wells Fargo, a popular bank in her Texas hometown but “the most inconvenient bank in Evanston.” Keats-Snow, who never carries cash, said she will change banks if charged for debit transactions.
“I’d like to keep my money,” she said. “Wells Fargo takes enough of it as it is.”
