The Durbin Amendment was passed on October 1st, 2011 – and while at first glance it seems like it should only affect banks – it turns out that the change is playing a role in how consumers use banks, too. The amendment puts a limit on how much a bank can charge merchants for processing debit card transactions for purchases.
Durbin's Amendment exists because retailers complained banks were charging them too much for debit card transaction fees. They argued that if Congress would help them by placing a limit on what banks could charge them to process debit card payments, retailers could pass on those savings to consumers. With lower prices, consumers could spend more, and it would help the economy!
What the Durbin Amendment Means For Banks
Before the amendment, banks made quite a bit of money every time a customer used a debit card to pay for a purchase. With the limitation on debit card transaction fees, banks claim they're losing profits and need to recover it from other sources.
What the Durbin Amendment Means For You
Because banks are losing profit due to these transaction limitations, they look for other ways to make money. Banks are like any other business – they have shareholders – and need to turn a profit. The Durbin Amendment means you will probably find it difficult to get a free checking account, cash back on debit cards, and you may even be charged to use savings accounts. Bank of America has already announced it will charge customers $5 a month to use their debit card to pay for purchases (Note: due to customer backlash, BofA has discontinued the $5 fee).
How Does The Durbin Amendment Change How You Bank?
With new fees imposed on things you are probably not used to paying for, you will need to pay close attention to your bank statements and any mail you receive from your bank regarding new fees for services. If you notice your bank charging for debit card use, maintenance fees and transaction fees, you may decide to change how you bank in order to save money.
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Here's what you can do to save money despite changes in the banking industry:
Start By Comparing Banks
This may not be the time to be loyal to any particular bank. If your bank is charging you more than you want to pay to use their services, shop around. Online banks typically have lower fees than your local bank, or you may decide to look at credit unions.
Use Cash More Frequently
Many people have learned toward using their debit cards more frequently than cash in recent years, but if you're going to be charged for swiping your card to make a purchase, you may want to go back to using cash.
Use Credit Cards Instead
If you have financial discipline, you may want to start using a rewards credit card to make your regular purchases. When you receive your statement, pay the card off in full each month. You'll avoid debit card usage fees, and you'll also earn rewards in the process.