Sept. 30, 2011 -- With Bank of America planning to charge $5 a month to customers who use their debit card for purchases, will other banks join the band wagon? Free checking may be falling by the wayside, and starting Saturday, the Durbin Amendment of the Dodd-Frank Act will limit fees banks collect from merchants when customers make debit card purchases.
While Chase and Wells Fargo are testing $3 monthly debit card fees in some states, the banks say they are not planning to roll-out fees in the immediate future.
A spokesman for Chase said the bank began testing the $3 fee in parts of Wisconsin and Georgia in February. However, he said customers have three other options for free debit card services such as Chase Plus Checking, which requires a $25 minimum deposit to open an account but has no monthly service fee.
Only Wells Fargo customers in Georgia, Oregon, Nevada, New Mexico and Washington will see the $3 "activity fee" when they make a purchase or payment with their debit card, according to spokeswoman Richele Messick. Customers will not be charged for using a Wells Fargo ATM.
She said Wells Fargo will be performing the "limited market test" of a monthly debit card activity fee beginning Oct. 14. Starting Nov. 14 customers may see a monthly $3 fee on their account statement if they used the card for purchases or payments in the previous month, she said.
Betty Riess, Bank of America spokeswoman, said the "economics of offering a debit card have changed with recent regulations."
She said the company will notify customers in writing at least 30 days before applying the fee. Bank of America will waive debit card charges on premium accounts and for Wealth Management/Merrill Lynch and US Trust clients. Customers can still get cash through ATMs, online bill pay and mobile phones for free.
Banks have warned that the Durbin Amendment could lead to negative repercussions for consumers. The amendment capped debit card transaction, or interchange, fees for merchants at 21 cents per transaction earlier this year, though the Federal Reserve initially proposed a cap of 7 to 12 cents last December. Before the amendment, debit card companies charged merchants an average interchange fee of 44 cents per transaction.
Citibank received attention earlier this month for raising its monthly checking account fee to $10 from $8 unless customers have a $1,500 minimum balance or monthly online billing and a direct deposit.
But Catherine Pulley, a Citibank spokeswoman, said after gathering customer feedback, the company has no imminent plans to charge customers for using their debit cards for purchases.
"The bottom line is customers don't want to pay to use a debit card, pay bills online or pay to use a teller," she told ABC News. "Customers told us this was unacceptable and we listened. We do not charge our customers to use their debit card."
Bank of America customers who want to avoid debit card changes may be looking to other non-traditional alternatives, such as free Internet banks.
Ally Bank and Charles Schwab Bank offer customers free debit cards and checking accounts with interest. Both banks also reimburse ATM fees charged by other banks nationwide and offer unlimited check writing.
The Schwab Bank High Yield Investor Checking service is linked to a free brokerage account and does not require a minimum balance or monthly fee. The current interest rate for customers is 0.20 percent APY. Calling Schwab on the phone and speaking to a broker at Schwab's over 300 locations are free. Schwab's checking customers can also deposit physical checks by mail via prepaid envelopes and scan checks for deposit on their iPhones and Android devices with a mobile app.
"So now we've got the best of both worlds. You can get your money anywhere for free and can deposit anywhere for free," Sarah Bulgatz, Schwab spokeswoman, said.
Schwab Bank customers who want to deposit their checks through the mobile app take a photo of the front and back and upload it to their account.
Ally Bank customers can deposit physical checks by pre-paid envelopes or by using a feature called eCheck Deposit which allows customers to remotely deposit checks to their Ally Bank accounts by scanning and transmitting a check image online.
Beth Coggins, Ally spokeswoman, said "Ally Bank has not changed its fee structure or increased fees in response to recent changes in federal rules."
The company also offers a debit card rewards program
"No branches, ATMs or postage required," Coggins said.
The current interest rates for Ally checking customers is 0.90 percent APY for accounts with $15,000 or more and 0.50 percent for accounts with less than $15,000.