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Bank Fees and Reduced Rewards: Looking for a New Banking Relationship

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By Pinyo Bhulipongsanon of Moolanomy.com

It’s getting a little crazy out there in the land of banking. Major banks are making some major threats about raising fees and cutting rewards. Indeed, as the July 21 cap on interchange fees approaches, some banks are announcing measures designed to help them replace the revenue they expect to lose if their debit card “swipe fees” are capped at 12 cents. Businesses have been looking forward to the cut, since it is represents a more than 70% reduction in many of the interchange fees they have to pay. But banks point out that the interchange fees are a huge source of revenue — revenue that they plan to take out of your pocket.

What Sorts of Fees Are We Talking About?

CNN Money reports that some of the fees are getting outrageous. ATM fees are on the rise (they probably would be anyway), with some banks charging up to $5 for non-customer ATM transactions. On top of that, the piece on CNN Money reports that penalty interest rate increases on credit cards are on the rise. 29.99% for a late payment or some other infraction is becoming more common.

[Related: Interchange Fees: The Billion-Dollar Fight For Control of Your Wallet]

And, of course, debit rewards programs are already disappearing, annual fees for rewards debit and credit cards are cropping up, and fees for overdrawing your account are on the way up. But the most interesting possible change reported by CNN Money is the one proposed by JPMorgan Chase: Capping debit card transactions. This means that you wouldn’t be able to make a debit purchase of more than $50 or $100 — no matter how much money you had in the bank. This is likely a move to encourage you to whip out your credit card — which won’t come with the 12 cent interchange fee cap. Transaction fees on credit cards are, on average, 3% to 5% of the transaction, and that won’t change on July 21.

What Should You Do?

If you are seeing an increase in fees on your accounts, a reduction in your rewards, and other undesirable changes at your bank, there are things you can do. Technology has made it possible to bank online, meaning that you can find competitive bank products from an array of banks with low overhead. PerkStreet Financial is getting a lot of press recently for its great rewards checking account and debit card. Banks like Ally and ING Direct offer accounts with no fees, and other benefits.

Another option is to check with a local credit union. While some credit unions are increasing fees and taking other measures, many of them still offer truly free checking and other bonuses. A local credit union might be a good choice for someone who is still wary of going completely online, or who wants to support local endeavors.

[Resource: Get your free Credit Report Card]

Moving your money might be the only way that big banks start listening. If you want to change banks, some things to consider as you make the move include:

  • Truly free accounts without fees and minimum balance requirements.
  • Low ATM fees — or no ATM fees.
  • Credit card without an annual fee.
  • Solid customer service.
  • Competitive yields on deposit accounts and low rates on loans.
  • Access to your money.

Whether you pay because businesses charge higher prices to help them cover interchange fees, or whether you pay in higher bank fees and reduced rewards, you are paying. It is up to you to do what you can to pay as little as possible.

Image: RogueSun Media, via Flickr.com

This is a guest post written by Pinyo Bhulipongsanon, owner of Moolanomy Personal Finance Blog, which covers a wide range of personal finance and investing topics, with features that include reviews, comparison guides, and Q&A sections.

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