Sunday, October 9, 2011

Debit Card Usage Fees Offer Another Reason to Go Back to Cash

If you needed another reason to switch from debit card to cash, your bank may be about to offer one. Bank of America is introducing a $5 monthly usage fee for all of its debit cards starting around January, and several other banks are expected to follow with similar fees over the course of next year. Surveys suggest that as many as 10 percent of consumers plan to pay for most purchases in cash because of new fees on debit cards.

The Bank of America fee is a usage fee, not an account maintenance fee. It applies only if you use the debit card to make a purchase over the course of the month. It does not apply to ATM transactions, just purchases. With the new fee, you may actually be better off going to the ATM in the supermarket than using the debit card at the supermarket checkout.

Better yet, get in the habit of getting cash at the bank and using it to pay for purchases, as I have been trying to do since September. I haven’t been perfect about it. Checking my accounts, I find that I used my credit cards for three point-of-purchase transactions during September, along with five gasoline purchases and a handful of online purchases. Otherwise, I’ve been paying in cash.

The gasoline pump and online seem to be the two places where it isn’t so convenient to pay in cash. Many consumers might want to take the approach I’ve taken, abandoning the debit card and using the credit card for these occasional card transactions. It might seem drastic to go without a debit card, yet if you can save $60 a year, that’s a big deal to the average consumer.

As consumers drop their debit cards, it creates an opportunity for an online-only payment mechanism that is more secure than a standard debit or credit card. At the same time, gasoline retailers might want to issue some form of purchase card that permits gasoline purchases to be paid online once a month. Currently, most gasoline brands are under contract with banks to issue MasterCard credit cards to their customers, and these contracts preclude them from offering their business fleet cards to consumers. But by the time those contracts come up for renewal, the gasoline brands might want to reconsider the business they are losing by not having a fuel-only payment mechanism for regular customers.