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When you’re working to avoid building or adding to credit card debt, the smart choice has been to use cash or a debit card instead. A growing number of financial institutions, however, are starting to charge fees when you use your debit card to make a purchase, making it a bit more challenging to live a "cash only" lifestyle.
The banks have created these fees to make up for money they will lose with the implementation of a new cap on what they can charge merchants for accepting their debit cards. According to some estimates cited by the New York Times, banks will lose nearly $6.6 billion in revenue a year because of the fee reduction.
But don’t fret. There are a number of ways you can avoid racking up these new monthly fees.
Try negotiating with your bank
If you’ve been a customer for a long time or if you have a number of different accounts with your bank, for example: a checking and savings account and an IRA or CD, you could try meeting with the bank manager and asking him or her to waive the new monthly debit fee. This strategy is more likely to work with a smaller local or regional bank where the local branches have more decision-making discretion.
Learn more about your options
Some financial institutions waive fees if you have direct deposit, choose to only use ATMs and online banking rather than tellers, keep a certain minimum balance (though it’s often a fairly high balance), or have your mortgage with them. Check your bank’s website or talk to a bank representative to learn what options they offer that can help you avoid fees.
See what other banks offer
Not all banks are adding these new debit card fees. Shop around and find out which banks don’t charge a fee to use your debit card for purchases.
Keep in mind, however, that does not guarantee that they won’t add the fee in the future. You can search the websites of banks that have a branch in your area or use an online "bank finder" to get the information you need to compare banks’ services and fees. Switching banks can be a big hassle, so make sure the benefits you’d get from the switch outweigh the complications (and costs) of getting new checks and debit cards, changing your direct deposit, and so on. You also don’t have to limit your search to the traditional "brick and mortar" banks; a number of online banks do not charge fees, plus offer other free perks to new customers.
Many credit unions and small local or regional banks don’t charge fees for using your debit card. There are some potential downsides to these smaller financial institutions, however. Most have a much smaller, local ATM network, which means you could have to pay a fee to use an ATM when you’re on vacation, for example. It’s wise to check the credit union or bank’s financial stability. You should also find out if your deposits are FDIC insured.
Go back to doing things the old way
Paying with a check or cash is another option. Most banks do not charge a fee when you use your debit card to withdraw money from one of their ATMs. The drawback is that if you lose your wallet or someone steals it, there’s no way to get your cash back. If you’re planning to use checks, find out what the check policy is at the places you shop most frequently. You may need to get a special check-cashing card from the store.
Manage your finances carefully
If you’re working to pay down your debt, switching to a credit card to avoid debit card fees could be a slippery slope. It takes tremendous willpower to limit your spending when you have access to that credit. In addition, if you already have a balance on your card, you’ll end up paying interest on your purchases that could quickly add up to significantly more than the monthly fee for using your debit card to make purchases.
If you need help building a plan to get out of debt, you can work with a reliable debt relief organization such as CareOne. A CareOne certified credit counselor can provide you with information on all the options available to help you better manage your debt, including debt management plans and debt settlement plans.
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