Bad news: Debit Card Fees

If your bank need to charge you an annual or monthly fees for the debit card you own, what would be your first reaction?Absurd.

The Good News: That is what just happened in US.

Apparently, Bank of America will start charging debit-card users $5 a month if they use their debit cards for purchases in any given month, starting next year. The fee will not be triggered by transactions at automated-teller machines.Paying to use a debit card was unheard of before this year and is still a novel concept for many consumers.

The move came due to a regulation which will cap the fees that banks can collect from merchants whenever customers swipe their debit cards starting 1 October. The limits on debit-card swipe fees—one of the most contentious regulations to arise from the financial crisis—were finalized by the Federal Reserve Board in June. The new rules will cap at 24 cents the fee merchants pay banks each time a customer buys something with a debit card, down from the current average of 44 cents. The rules apply to banks with $10 billion and more in assets.There is no similar cap on the merchant fees that banks can collect when customers use their credit cards, however. That means many banks are increasingly encouraging customers to reach for their credit cards, in hopes of reversing a trend toward debit card usage in the past several years.

Bad news: Debit Card Fees by CF Lieu - Certified Financial Planner Malaysia

In Malaysia, debit cards (new issue) are still free of charge. However, say for Maybank, converting from your ATM card to Visa debit card will cost you RM 12. Thanks, but no thanks.

I am pretty sure, though, if debit card fees from merchants are capped here, Malaysia banks will follow suit to impose debit card annual fees. Let’s face it, once upon a time, the spread between mortgage interest rate (Base Lending Rate, or BLR plus before 2008 market crash) and fixed deposit rate is large. That is where banks made a large bulk of their profit without much effort. Now, with FD rate at 3_%, and competitive mortgage interest rates of BLR 6.6% minus 2_%, banks’ profits are being squeezed hard. Banks need to formulate more creative ways to grow or at least sustain their revenue. In this case, the loss of revenue is transferred to customers. The other day, a transaction to reset my CIMB bankcard costed me RM 12. Some people also complained of CIMB’s very slow TAC SMS reaching their mobile especially during peak hours, and now there is an option to purchase a RM 65 TAC device. Thanks again, but no thanks.

Have you had any experience of being charged any unreasonable fees by your bank?

Update 2 Nov 2011
Bank of America Corp is dropping plans to charge a $5 monthly fee for debit card use, the bank said in a statement on Tuesday.
The second-biggest U.S. bank said the move was in response to customer feedback and competition.

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