Are Debit Card Fees Coming?

My husband got a new debit card, and it came with new transaction fees. If he uses the card as “credit” (with no PIN) there’s no fee. But if he chooses “debit” and enters a PIN, the credit union charges him a 25 cent fee – for every transaction! A couple of times, he says he tried to use the card without a PIN but wound up paying the fee anyway. Needless to say, he's not happy with the change.

New Fed debit card overdraft rules went into effect this past weekend (I’ve been getting calls from my bank urging me to opt into overdraft protection – have you?) and the FDIC recently released an advisory letter to the banks it supervises urging them to make sure they comply fully with the new regulations, and go one step further and contact customers who use overdraft protection more than 6 times in a year to discuss less expensive alternatives.

Now that financial institutions will be taking a hit in overdraft revenue, are new debit card fees in order? Maybe.

Keep in mind that merchants aren't supposed to charge debit transaction fees – they are prohibited under Visa and Mastercard’s merchant agreements. In other words, a retailer isn’t supposed to tack on an extra fee if you want to pay with your debit card. Nevertheless, the California legislature recently passed a bill prohibiting debit surcharges. (Credit card surcharges are already illegal in California.)

But issuers are free to charge debit card fees, as they do in my husband’s case. Annual fees, transaction fees, or fees for certain types of transactions may become more commonplace – so watch your statements.

If you’ve been charged a debit card fee, we’d like to hear about it here. Share what kind of debit card fee your issuer charges, and feel free to name names!

Tagged as: annual fee, debit cards, financial institution, overdraft fees, surcharges, transaction fee

Gerri Detweiler Credit.com's Personal Finance Expert, Gerri focuses on financial legislation, budgeting, debt recovery and consumer savings information. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.comTalk Credit Radio. Reach Gerri at creditexperts@credit.com.