With the recent increase in new fees at banks, and the backlash it has caused, people are starting to determine what the alternatives are. At the moment, there are still banks and credit unions that are maintaining their current fee structure without adding anything new. Many of those are also maintaining their “free” accounts. But, if the Durbin Amendment remains, it may be only a matter of time before they buckle under the costs and start removing “free” accounts and adding fees.
What then? It that happens, we might see a financial world where all debit cards have a monthly fee. We might see more annual fees on credit cards, and higher interest on credit cards. We might see more and more checking and savings accounts having a minimum deposit amount and/or a monthly fee.
As a card-carrying member of the NGPAF (Not Gonna Pay Any Fees) club, that might just make me decide that I don’t want to use any of their services anymore. My depository institution might just have to become the coffee can in my backyard. Seriously, though. If all of those services become services with fees, we might see a pretty drastic increase in the usage of cash again. Many of us don’t use cash all that much. I know I don’t.
And what happens if we return to a cash economy? The banks get even less transaction fees. Their income drops because of it. And we all see what happens when their bottom line is threatened. More fees. It could send the banking industry into a never ending spiral of more and more fees until the only people who still use banks are the ones who don’t feel comfortable keeping thousands of dollars in a coffee can in the backyard.
Luckily for me, I belong to a credit union that isn’t likely to add any additional fees anytime soon. What about you? Do you belong to a Credit Union or Bank that hasn’t added fees recently? What if they did? How long do you think it will be before we have to choose to either pay fees or carry cash?
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There is another alternative! You can use a credit card and pay it off every month. I think it is important to learn how to practice good financial habits.
I’m in the NGPAF club too. We already use mostly cash for everyday items so I don’t mind going back to the cash economy. If all internet store accept paypal, then I probably wouldn’t mind giving up the credit card either. I don’t use debit card.
I definitely won’t pay fees to be able to use a debit card, or even to maintain a basic checking account for that matter. I recently closed my checking account, because I couldn’t avoid the fees anymore.
When I use plastic to pay for purchases, I always use a credit card, but if no annual fee credit cards become a thing of the past, then I’ll be glad to pay in cash instead. It’s not worth having to pay fees to spend your own money.
I suppose you have to take into consideration any rewards or savings that you get for using your credit card or debit card, and if the rewards make it worth while to pay fees, but then again, many stores and especially local businesses offer discounts for paying in cash as well.
Maybe if people start using cash more, it will force the banks to become more competitive and find ways to cover the fees other than transferring them to the customer.
101 Centavos says
Our debit card from a small regional bank functions like a credit card, meaning that we can’t get cash back on retail purchases. Were they to add a fee to it though, we’d ditch banks and go to a small credit union. We’ve already got a couple short-listed.
Matt @ Financial Excellence says
I have no problem paying cash since I already do anyway. Not too worried about it yet since my bank is vowing to not charge fees for the debit cards. If they do, I’ll probably switch to 100% cash or check (how old fashioned!)
Tony @ Investorz Blog says
I belong to a credit bank that hasn’t added any fees recently. However, I don’t really like to use credit cards. Far too easy to overspend.
banks will always try and make money somehow. when the government took away the ability to add on ridiculous late fees and raise rates for being late or having a worse and worse score, then they went where they could.. paying for a checking account. this was the case many years ago when checking accounts had fees similar to this.
it’s great to have a credit union that holds their fees down, and other online accounts will benefit from this as well, at the end of the day the market will speak.