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The Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 limits the debit card swipe fees that banks can charge. The fees, which recently averaged 44 cents, will be capped at 21 cents – a decline of over 50 percent. This cap is set to begin on October 1, 2011. As a result, banks are looking for ways to make up for the lost revenue that they will suffer.
As we’ve mentioned on this site, debit card rewards are suffering as a result of the fee caps. However, checking accounts are also suffering.
This leaves consumers in the crossfire of the battle between the regulators and the banks.
Banks are sure to cut back on free services in order to make up for their lost profits. It is very likely your checking account may be a casualty of this bill.
With checking accounts being an important part of most of our financial lives, it may seem like the issue is out of the control of most Americans. If more fees than you would like or can afford are added to your checking account, don’t fret. There are several other options out there to choose from.
Find Another Checking Account
One option is to find another bank that still offers free checking.
One such bank that has stated that it has no plans to alter it’s free checking (or debit card rewards) programs is Synovus. The bank has locations in Tennessee, Alabama, Georgia, South Carolina and Florida, so customers in those states have the option of switching over.
PNC Bank also offers a free checking option. Their offer comes with no minimum balance requirement, no fees for using PNC ATMs and online banking as well as unlimited check writing. PNC has locations in 15 states – mainly in the Eastern US and Washington, DC.
USAA is another bank that offers free checking. There are no fees for transferring funds to other US banks (unlimited number of times), no minimum balance and no fees for ATM usage (up to 10 per month and they’ll also refund ATM fees from other banks of up to $15 each month).
There are also no fees for online bill-pay and online account management. They have locations all over the United States, so it shouldn’t be too difficult to find 1 if you are interested in their offer.
A prepaid card is just what it sounds like – a card that is funded by the customer prior to making purchases.
Some offer the ability to have a paycheck deposited directly onto it, effectively acting as a checking account. Also, many offer the options of ATM withdrawals (often without fees) and/or debit purchases.
Additionally, customers who use such cards may have online banking options, giving further similarities to a checking account. Such cards generally have big-name logos such as Visa or MasterCard, so they’re widely accepted as payment.
These cards, however, do come with fees.
Activation fees range from $3 to $35 and some have ATM charges. So, you won’t go without fees by switching to a prepaid card.
However, according to a 2009 study, prepaid cards result in less fees than checking accounts. The difference was less than $100 annually, and every little bit helps.
Check-cashing stores do just that – cash checks. Customers take their checks in and, for a fee of generally 3 to 6 percent of the check, get cash for it.
So, if you walk in with a $1,000 check, you’ll probably have to pay $30 to $60 to cash it. That’s not much of a deal when compared to most checking accounts.
However, despite the relatively high fees that are charged at traditional check-cashing stores, other businesses offer the same services for lower fees.
Larger retailers such as grocery stores and big-box retailers are known to offer check-cashing services for as low as $3 per check. If you get paid bi-weekly and take it to such a business every time for, say, a fee of $4, you’d end up paying $104 annually to cash your checks.
That is a lower amount than many banks charge annually for checking accounts.
However, you’ll only be getting check cashing services and will forgo all of the other services that come with checking accounts, so keep that in mind.
A check-cashing store is only a good option for those who use their checking accounts primarily for cashing checks.
If you rely on debit card usage, paying with checks and/or online bill-pay, you probably will want to go with another bank or prepaid card.
With a check-cashing store, you’ll have to pay your bills via credit card and/or money-orders – both coming with their own fees – so be very careful before you go this route.
Before you get rid of your current checking account, make sure the grass is really greener on the other side.
You may not like having to pay more (or any) fees for your checking account, but that doesn’t mean that the other options are better.
For those who do find that getting rid of their checking account is the best option, most will be best off by going with a better checking account or a prepaid card.
It’s hard to imagine that most people will be better off with a check-cashing store than with their current checking account, taking the added hassle and potential fees of using such stores into consideration. However, they are an option, so keep them in mind