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How the debit card fee brouhaha may affect your credit card

November 08, 2011

| Money Rates Columnist

The recent hubbub about debit card fees could have a big impact on you and your credit card.

In case you missed it, Bank of America proposed $5-a-month fee on use of its debit cards, which it planned to roll out in 2012. But after much public outcry, Bank of America backtracked on these plans. Other banks had proposed similar debit card monthly fees, which were also rescinded.

Bank of America and other banks that had announced this fee were did so in the wake of new regulations on debit card transaction fees, which were cut from an average of 44 cents per swipe to 21 cents. That regulatory change is costing banks an estimated $8 billion annually, so the debit fee was one way to recoup the loss.

How banks may replace lost debit card fee revenue

While consumers won this round with the banks when Bank of America and other banks cancelled their debit card fee plans, the banks' desire to replace that $8 billion in revenue hasn't gone away.

Banks may lie low for a while to let consumers cool off. But before long they will be back with a new round of revenue raising possibilities. According to CNNMoney.com, banks will likely focus on stealthily increasing the fees we're already used to, including:

  • Checking account fees
  • Foreign exchange fees
  • Paper statement fees
  • Higher late fees, such as for a car loan payment

Credit cards may be new source of fees

In addition, banks may be looking at your credit card to help replace lost revenue:

  • Banks are expected to encourage their customers to use prepaid and credit cards instead of debit cards. This idea was floated around a recent industry conference. For instance, your bank may waive a monthly maintenance fee on your checking account if you make a certain number of purchases each month on your credit card.
  • Look for combination debit/credit cards, a hybrid piece of plastic designed to skirt the new debit card swipe fee limits.
  • Key an eye out for higher credit card interest rates. Although credit card regulations implemented in 2009 prevent banks from raising interest rates at any time, for any reason, they can still do so (in most cases, with written notice).

With many credit card holders in the U.S. making more late payments and putting more debt on their credit cards, higher late fees and interest rates could help banks--even while they put more customers deeper in debt.

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