If your bank is using new regulations as an excuse to charge new fees, it's time to explore your options.
Look for a nonstop flight, a mobile phone provider, or an Internet service provider, and you’re probably going to be stuck with a handful of choices. But shop around for a bank, and you’ll have hundreds of different places fighting for your business. Keep this in mind as you worry about the flurry of new fees being imposed by the major banks.
As Americans, we’re lucky to enjoy intense competition for our banking business – which is why recent fee hikes are perplexing. But if the big banks are being stupid, no sense in you joining them. Here’s what you can do…
Know all the fees. Banks are required to prominently disclose them on their websites as well as at their branches. If you haven’t checked in a while, be sure to look up your bank’s fee schedule and ensure that they’re in line with their competitors.
- Use a smaller bank. You’ve probably heard about the debit card fee increases that Bank of America and other major banks have imposed. They’ve been blamed on the Dodd–Frank Act, which limited the merchant fees banks can charge retailers for debit card transactions. What most stories leave out: This provision only applies to banks with more than $10 billion in assets – essentially the top 60 banks. This leaves thousands of smaller banks and credit unions free to continue business as usual. Without these new regulations, the smaller banks have no excuse to raise their fees on debit cards.
- Find an Internet-only bank. Sometimes it seems like there is a branch of Citi, Chase, or BoA on every street corner. But do you really need to use a large retail bank? I started using an Internet bank in the mid-’90s, and I haven’t looked back. By saving the costs of expensive branches and their staffs, these institutions pass on the savings. It’s not uncommon to find online banks with free checking, no fees, and a low minimum balance. In fact, some even refund the ATM fees charged by other banks. You still get an ATM/debit card for deposits and withdrawals, as well as a standard checkbook. The downsides: It’s hard to make large cash withdrawals, deposit coins, or receive a cashier’s check. But, free from the need to use a local branch, you can select the best bank you can find, even if it’s in another state.
- Join a credit union. Credit unions are nonprofit and community-based. Compared to the big banks, most credit unions pay higher interest on savings and charge less for loans. Their fees and interest rates on credit cards are often lower too – and many still offer free checking. If you’re not eligible for a credit union through your job, use Credit Union National Association’s credit union locator to get a list of the nearest credit unions. Look for “community” as the type, which means you’re probably eligible to join based on where you live. Also find out if they’re a member of a “shared branch network” by going to CUServiceCenter.com. If they are, that means you can go to any other shared branch credit union or ATM in the world to conduct business just like you would at your own.
- Use your credit card. If you pay off your balance in full and on time, you should question using a debit card in the first place. By switching to a reward credit card, you can receive valuable cash back or loyalty points, benefit from purchase-protection policies, and enjoy a few weeks of a free loan before your payment is due. In fact, there’s been speculation that these new debit card fees are designed to steer people to use credit cards. The only problem is that those who carry a balance will be better off finding a debit card without fees.