Moving Away from Plastic

  by Tyler Curtis

by CareyAnn Peterson

As Online Banking has become more accessible and easy to use, I have found myself using my debit card more and more and rarely using cash. This is becoming a common trend among Americans. We are choosing to use plastic even for small purchases. Banks have capitalized on this trend by offering merchant services to small, medium, and large businesses and it is becoming very rare to find an established business that does not accept plastic. Although using a debit card is typically more convenient, retailers and consumers are carrying the burden of the added costs of processing these transactions. Recent legislation has taken effect that might make you think twice about using your debit card in the future.

The Durbin Amendment was proposed by Illinois Senator, Dick Durbin, to lower the fees that large banks are charging for merchant services. Before this Amendment took effect on October 1st, retailers paid as much as 44 cents for every debit card transaction placed. Now, banks that have more than 10 billion in assets will only be able to charge retailers a maximum of 24 cents per transaction. The intent of this amendment was to help retailers lower their expenses and be able to offer discounts to customers using cash or a debit card. In the end, retailers might be the only ones that see the cost benefit of this change. Large banks are looking for ways to make up their expected loss in revenue which could end up costing you.

You the consumer need to be aware of new fees that may arise from using your debit card. Bank of America is planning on adding a $5 monthly fee for using your debit card to make a purchase. You will still be able to use the ATM freely, but be prepared to start carrying cash or you will see an increase in debit card fees. Bank of America will however waive the fee for anyone who also has at least $5000 in a linked savings account, a large investment account, or a mortgage with the bank. Other big banks are taking away free checking and their various reward programs. They will be encouraging you to use your credit card instead of checking account so that they can increase revenue from credit card transactions and fees.

It is important for you to evaluate your checking account services with your bank to see if you will see an increase in fees. If your bank account will or has already seen changes, and you are not comfortable with only using cash or credit for purchases, you may consider changing to a smaller bank or credit union that offers free checking. Although the Durbin Amendment took effect October 1st, banks may not make changes to their account fees until 2012, so be on the lookout for any changes in your account over the next two quarters.

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