Due to the recent legislation,  known as the Durbin Amendment,  that limited and lowered merchants interchange debit card fees, big banks are fighting back by imposing that consumers pay a $5 per month debit fee to make up for their drastically reduced fees dictated by big government. The aim of this article is to provide ideas to avoid banking debit charges.

An interchange fee is the amount a merchant has to pay banks and credit card companies every time a credit or debit card is swiped. This fee covers the cost of processing the transaction and fraud prevention.  Soon after the $5 fee was announced by Bank of America, there was a big outcry and finger pointing among consumers and politicians, even though the politicians signed the bill into law in the first place.

More big banks are planning on following Bank of America’s footsteps, so the  following tips may help you fight back against outrageous banking fees:

• Switch To A Prepaid Debit Card. American Express recently announced the launching of a prepaid debit card which features lower fees and simpler terms than most debit cards. If you choose this option, be sure to read their terms and conditions very carefully.
• Try An Online Bank. Many online banks like Ally and ING Direct offer free checking accounts, no debit card fees and good reward programs.
• Change To A Credit Union. The new legislation states that small local banks and credit unions with assets of less than 10 billion dollars are exempt from the fee limit. Although community banks and credit unions don’t have the fancy high tech online services, they are known for excellent customer service, free checking accounts and even rewards programs for using their debit cards.
• Change Your Payment Methods. If you think switching banks will be too  inconvenient, you can ditch your debit card and pay by cash, checks or credit card. Neither option is perfect, but if you want to avoid debit fees they are the cheaper options. On the other hand, using a credit card to pay for everything is risky if you fail to pay off your balance every month.

Although there’s no guarantee that the government won’t come up with another “great idea” for local community banks and credit unions as well, for now you may benefit if you switch to one of these smaller banks by at least not paying $60 for annual debit card fees.

Bank prepaid cards, also called preloaded credit cards, are popular with consumers who have a less than perfect credit and can’t qualify for a credit card with reasonable APR rates, due to inability to pay credit card debt.  They are also an alternative for people who can’t afford to have a checking account due to high fees on overdraft and other services.

More banks are adding fees to services who once were free, so many people are opting out of bank accounts and choosing these prepaid cards instead. These reloadable cards carry the same credit limit you load on them when you pre-pay them, so this is a good way to control spending.  However they also have some drawbacks, so before you rush and apply for one, let’s look at the advantages and disadvantages of bank prepaid cards.

Benefits

• Most banks allow customers to direct deposit their paychecks to their preloaded cards.
• A good alternative for someone who often bounces checks, as it leads to a better money management.
• The best cards are accepted worldwide and offer ATM access.
• They may be a less expensive option to cash-checking stores if you choose the right company.
• They can be used to pay bills.
• Very handy for online shopping.
• Most can be used wherever traditional debit or credit cards are accepted.

Potential Drawbacks

• Unlike traditional credit cards, federal law liability protection does not apply to prepaid cards, although some banks may voluntarily offer it.
• You have to pay a reloading fee every time you add cash to your card.
• If you want to close your account and want to get the remaining balance out of your card expect to pay $10 to $15.
• Some issuers charge a $10 monthly fee.
• If you want to use it for traveling,  beware that many car rentals and hotels place a hold on your funds, which makes it useless.
• Some banks impose an ATM fee in addition to cash withdrawal fees.
• Usually users pay a fee when trying to withdraw or make a purchase using a card with insufficient funds left. In other words, they’ll make you pay for a declined transaction.
• Many banks voluntarily add liability protection, however the protection may not apply to all transactions.
• It is easy to lose track of your balance, the only way you may know your balance is by calling customer service, which triggers another fee.

As you can see, you should take the time to compare fees and features and look for companies with fewer and lower fees. Some fees may be hidden in the fine print, so do your homework and read thoroughly before applying.