Teaching Tip: This is the second of two “Finance in the News” write-ups dealing with debit cards. These assignments can be presented together or following each other.
In Chapter 5 we discussed debit cards and how to use them, but with the recent changes in costs, there are more questions, so how should you use your debit card? This is the question of the hour since the Bank of America is adding a $5 monthly fee if you use your debit card to make purchases and the Sun Trust Banks and Citigroup are making similar moves. After all, these banking charges definitely add up – $60 per year for your debit card in addition to your other bank charges. For example, according to the Bank of America’s “Checking Accounts website,” the cost of an eBanking account where you choose to make all your deposits and withdrawals electronically or at their ATMs runs about $9 a month. Add that $108 to the $60 debit card yearly fee and you’re looking at $168 in just banking fees.
Given this new $5 charge, just how should you use your debit card and what can you do to keep your costs under control? A recent Wall Street Journal article, “How Debit-Card Fees Ruin Banking Relationships,” looks at these questions and provides several rules for managing your debit card including:
– Picking the right kind of financial partner
– Carrying some cash
– Concentrating your financial services in one institution
– Paying off your cards
SmartMoney also has some useful tips in its article “How to Cut Bank Fees.” Take a few minutes to look at these articles and think about how you are using your debit card. Will you be making any changes?
1. According to the WSJ article, how much does the average checking account cost to maintain each year? Are you surprised? Be prepared to discuss this and whether you feel the bank charges are justified in class.
2. Develop a strategy for lowering your bank fees and include in that proposed strategy what all your banking costs are at present, what your strategy is for reducing them, and how much you will save over a year. Be prepared to present this in class.