So no one likes these new debit card fees that are in the offing. Does that mean it's time to put purchases on your credit card instead?
Before answering that question, let's back up to the beginning. Bank of America said last week it's going to charge a $5 fee every month you use your debit card starting next year. In the meantime, Wells Fargo and Chase already are testing out a $3 debit usage fee in certain areas.
Why the big change? In short, new regulations limit how much a bank can charge a retailer for accepting debit cards for purchases. Before, this was a cash cow for banks. Now? Not so much. And as the CEO of BofA reminded us on Thursday: Banks have a right to make a profit. So say hello to these new fees.
There also are whispers out there that banks are secretly hoping that by charging you a debit card fee, you'll pull out your credit card you have with them instead. (Because there are no restrictions on the fees banks can charge retailers for taking credit cards. And that means more money.)
The question is: Should you? If you use your debit card to stick within your means, it may be best to pay cash instead and only use your debit card when absolutely necessary. But if you can keep your spending under control, maybe dusting off the credit cards for everyday purchases isn't a bad idea.
Linda Sherry, director of national priorities at Consumer Action, suggests designating one credit card for incidentals that you pay off in full every month and on time. You'd otherwise end up paying interest, which could cost even more than that pesky debit fee you were trying to avoid in the first place.
Keep another card for emergencies, she recommends, for large unexpected expenses such as a car repair or a huge dental bill.
"Try to pay off a balance in two to four installments (do not pay only the minimum), and pay it off before adding any more transactions to the card," Sherry advises.
As an alternative, she recommends searching for a card, like Chase Blueprint, that allows you to pay off the smaller incidentals in full each month with no interest, while keeping a balance for a larger purchase.
Will you use your credit card more to avoid debit fees? I'd love to hear your plans.
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