What the New Debit Card Fees Mean to College Students and the Unemployed

As if being a starving student or juggling a minimum wage job while trying to launch your career were not enough, banks are the most recent conglomerates to reach into the shallow pockets of the shrinking middle class. This past week Bank of America announced that in 2012 they will start charging $5 per month on any customer that uses a debit card. One purchase, even if it’s just for a $2 muffin, will trigger the $5 fee for that month. That’s in addition to whatever the customer might be paying to have the bank account from which the debit card draws. So if the customer pays (for example) $12 per month on a checking account, plus another $5 a month to use a debit card, that’s potentially an extra $204 a year for the privilege of using one’s own money.

Who Does This Affect Most?

College students and new graduates in particular have come to rely on debit cards to pay for everything from tuition to library fines to parking. Until now it was easier for students to get debit cards than credit cards because debit cards are tied to accounts that already have money in them. Depending on how the account is set up a debit card can turn into a credit card if the cash if the account runs out, or the transaction will be denied if there is no money in the account to cover a purchase. This makes debit cards the perfect tool for college students or graduates looking for work, because their parents can fund the account to help cover school costs or living expenses. Plus, a student can start accumulating a credit history while still in college.

But now all those benefits come with a cost, and it’s up to consumers to decide if they’re worth it. In a poll done by Associated Press-GfK 66 percent of the banking customers survey said they’d find a way around using debit cards. For college students and unemployed graduates this means finding other ways to get your money when you need it.

Alternatives to Using Debit Cards

Option 1) Use a money card instead of a debit card. Walmart, for example, offers a VISA money card that acts just like a debit card and can be used at any ATM. You don’t have to apply for it, so you can’t be turned down. Instead you simply buy the money card at any Walmart, and then load it with cash. From then on it acts just like a debit card EXCEPT you can’t spend beyond what you’ve deposited.

There is a $3 fee every time you load the card (regardless of the amount), but if you only load it once per quarter you’re saving money right there. True, if you use your Walmart money card at an ATM you will be charged a hefty fee, but you can get around that by getting cash back the next time you use it at the grocery store.

Option 2) If you prefer not to open a money card because you don’t want yet another account when you already have a perfectly good checking account, then just use your debit card only at your bank’s ATM. Banks will not charge customers for ATM use, as long as they use their ATMs. This means, however, that you will have to plan ahead and get cash ahead of time to cover your expenses.

Option 3) Go back to writing checks. Since you’re paying a monthly fee anyway for your checking account, you might as well use it. If some of your creditors don’t accept checks see if you can set up online bill pay. Many creditors will (for free) debit your checking account per your request. This is different from online autopay, where they credit your account the same time every month. You don’t want that, UNLESS you know you’ll have always have money in your account every month to cover their debit.

You may think the answer is to just not bank with Bank of America. However, after BofA’s announcement both Wells Fargo and Chase banks have revealed that they’re now considering imposing a $3 per month debit card fee in 2012. And even though Citigroup said they have no plans to charge for debit cards, they are raising account fees in 2012.

Many financial analysts predict that all banks will eventually charge for the use of debit cards or account raise fees, leaving students and the unemployed few options when it comes to free use of their money. Hmm…stuffing money under a mattress like Grandma did is starting to sound better everyday.

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