The Bank of America new $5/month fee for using your debit card and how to get PAID for using DEBIT cards

Consumers Union just sent me an email opposing this new fee:

…  And it’s not just BofA. Wells Fargo and Chase are testing out similar fees to decide if they want to follow suit.

It wasn’t that long ago that taxpayers had to rescue Bank of America because their get-rich schemes emptied their coffers and drove our economy to the brink. Now they’re whining that they don’t make enough money off electronic transactions that cost them almost nothing to process.

CU fails to explain how debit card transactions work.

Banks charge the MERCHANTS!

For debit transactions (with PIN, not VISA or M/C), merchants usually pay a fixed fee.  From the 6/29/11 NY Times article about legislation REDUCING the fees charged to merchants:Fed Halves Debit Card Bank Fees

… “The final rule still represents a 45 percent loss in revenue that banks use to provide low-cost accounts to our customers, fight fraud and maintain our efficient U.S. payments system,” Mr. Keating said. “Consumers will see higher fees for basic banking services, and banks — particularly community banks — will still feel the revenue pressures that this rule will cause.” …

It sure looks to me like the legislators “FORCED” banks to shift costs from merchants to consumers!

Of course I do not know the exact costs incurred by banks for maintaining the debit card system, but I know one thing for sure:

It’s not FREE!

I’m definitely not a champion for the banks, but I don’t understand why Consumers Union didn’t address this issue.

If you have a debit card subject to a fee, don’t use that card anymore and instead use a FREE debit or credit card with cash back features.

The best deal I found is the PayPal DEBIT card with the M/C symbol.

When used as “credit” (online or in a store NOT using the PIN, but using as “credit” and signing for the transaction), PayPal refunds 1.5% of the amount purchased the next month if you choose to have PayPal as the preferred payment option for your Ebay listings.  I don’t even sell on Ebay!  It’s NICE to get that deposit every month.

If you don’t opt for the Ebay PayPal preference, you still get 1% cash back.

PayPal can afford to do this because MERCHANTS pay the fee, often 3%.  Here is a paper on Interchange Fees in Credit and Debit Card Markets: What Role for Public Authorities?

Using the PayPal card as CREDIT and having your account set up to automatically transfer funds from your bank account is almost like using your bank debit card, but you get a day or two before the transfer hits your bank account.

So if you’re low on funds and you’re out shopping or you have an emergency, you don’t need to worry about NSF fees or transactions being declined as long as you can deposit funds before the PayPal charges hit your bank account.  You can set up email notification for all debit card purchases as well as notices for transfers from your bank account and “usually” that works well.

PayPal system problem: no email notices for purchases and backup funding [This appears fixed now execpt for fuel purchases]

Obviously you can log in to your PayPal account and check the transactions there or simply keep a record (receipts) of your purchases and add them to your checkbook just like checks.   I’m not affiliated with PayPal, am fully aware of the many PayPal hate sites and I’ve also had my share of problems with PayPal.  But the PayPal debit card has to be the absolute best in the industry, especially because you can avoid overdraft fees unless you don’t get the cash into your bank account by the time the transfer posts and there is no annual fee, over limit fee, etc.  I’ve used PayPal since the 90s and never paid a dime in fees.

There is a learning curve with PayPal and you have to test your account to make sure your backup funding source is set up correctly and that your daily spending limit is set to what works for you.  But it’s well worth the effort.

 

 


 

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