How to Beat the Big Banks at the Fee Game

How to Beat the Big Banks at the Fee GameI haven't paid much attention to the hysteria over Bank of America's (BAC) new $5 monthly fee to use its debit cards, and the announcement by competitors that they won't follow suit. Why? Because I keep my money in two local banks that pay me for using their debit cards. And the accounts are free -- no fees.

What I can't figure out is why everyone else doesn't do this.

I moved my entire emergency fund into two high-yield checking accounts back in 2007, a local one for convenience, and an institution with three branches in a Southern state that I opened online. Back in those days, you could get really juicy returns -- up to 5%. Now, the best accounts offer half that. But hey, I still prefer to keep my money in a bank that pays me rather than me paying them.

Here's how high-yield checking works: You must swipe your debit card, using a signature rather than a pin number, about 10 times month. You agree to get your statements by email, use online bill-pay, and make one direct deposit or ACH transfer a month. (An ACH transfer is when you sign up at the website of some entity you pay monthly -- power, cable, mortgage company, etc. -- and they automatically withdraw the money from your account).

In return for this, one of my banks pays 2.15% on balances up to $25,000. The other offers 3% on balances up to $15,000. There are no minimums, no fees, no ATM charges -- and I get reimbursed for fees charged by other banks' ATMs. If you blow it -- as I did last month by only swiping nine times -- you get either no interest or nominal interest for the month. But so what? At least I got pocket change for the parking meter, and I didn't pay anything. (Failure to meet the requirements also means you won't get reimbursed for foreign ATM fees, though, so I make it rule only to use my bank's ATMs).

An Hour of Your Time


I found these accounts by entering my zip code on CheckingFinder.com, a website run by BancVue. It's a Texas-based software company and the technology backbone of the vast majority of the high-interest checking accounts provided by small banks and credit unions. BancVue monitors and analyzes the profitability profile of each customer within each institution to ensure that collectively, the accounts offer enough profit to the bank to justify the interest rates on its checking accounts. (If they don't, you'll see the rate offered drop.)

Local banks can offer interest on checking because the requirements described above reduce processing, printing and mailing costs, and the debit transactions generate interchange fees -- charges paid by merchants for debit swipes -- for the banks. New regulations just shrank those fees, capping them at 24 cents per transaction. The previous average was 44 cents. But small savvy banks figure out how to share that 24 cents with you. Big greedy banks take the 24 cents per swipe and also charge you another $5 a month for using the card.

Now don't give me any excuses about what a giant pain it is to switch to a new checking account. Balderdash. Of course banks want you to think it's a huge deal, so you'll stay put and pay stupid fees. But it's not. One year, I switched accounts three separate times. It takes all of an hour to open a checking account online and write down the addresses of all the companies in your online bill pay and reenter them into the new account.

If Bank of America is going to charge you $5 a month, that's $60 a year. Spend an hour changing banks and you've made $60 in a 60 minutes. Personally, I'd invest the hour as a matter of principle. (Repeat after me: I will never pay a bank for the privilege of keeping my money.)

If you aren't organized, if you don't like jumping through hoops, you'd still do better with a free account than a fee account. I jump through the hoops because it's fun to beat the big banks at their own game, and it's fun to make interest every month that I can spend on something fun. It helps that I'm a personal finance geek who tracks my spending to the penny using online software. (The technology does the heavy lifting; I only spend five to 10 minutes a week on it.)

And I'm sure some of you will question the wisdom of keeping my emergency fund in a checking account because of fraud issues. But most banks have the same zero liability policy on their credit and debit cards if you report the fraud promptly. The difference is if thieves steal your credit card, you can protest the charges and refuse to pay them; if they pinch your debit card and pin number, say adieu to your cash – and hello to the hassle of getting it back. I don't really worry about this since I see my transactions every day in the two minutes I spend online with my budgeting software. (The software is linked electronically to all my accounts so transactions appear automatically within 24 hours, and sometimes in real time.)

So come over from the dark side. Even if you don't jump through the hoops, you may still do far better in a free high-yield checking account with a small bank or credit union, where your money won't suffer the death of a thousand fees.


Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum

183 Comments

Filter by:
Dating

I think all of men want to become a better one, and every woman like a successful man. I know another webstie www.wealthychats.com which can guide you to success.

January 06 2012 at 1:29 AM Report abuse rate up rate down Reply
Baby

wow ~~ Recently, I found a cool place -- Tal l “HUB”.c○ m -- where many tall people chatting there. I'm an open minded girl from US, I also like discuss fashion and love

with tall guys on it!2143254565768

January 04 2012 at 12:29 AM Report abuse rate up rate down Reply
Cheer

Recently, I found a hot place -- Tal l “HUB”.c om -- where many tall people like sports and chatting there. I'm an open minded girl from US, I also like discuss fashion and
love with tall guys on it!

December 30 2011 at 12:04 AM Report abuse rate up rate down Reply
Jyjnhy

My best friend ,she just has announced her wedding with a millionaire old man Ronald who is the CEO of a MNC ! They met via ----SéêkSúɡárDαd.℃⊙M--.- ..it is the largest and best club for rich man date with young and beautiful woman and their admirers to chat online. …you don’t have to be rich there ,but you may meet one ,maybe you wanna check it out or tell your friends ! You did give permission when you signed the loan documents. It's in there. Banks sells their Mortgages to other companies all the time. The loan originator gets its money from the closing and filing fees. The new mortgage company gets it over the long term in interest payments.

November 03 2011 at 10:15 PM Report abuse rate up rate down Reply
Bill W

Hmmmm, why don't more people do this? Oh, I don't know ... maybe because most of us don't have $40,000 to sit around in our checking account?! Who the hell would do that. At best, i keep a balance under $500. And if I did have more money, it would go into an investment account, not a checking account ... even one that draws interest.

November 02 2011 at 1:09 PM Report abuse rate up rate down Reply
Angel Angelo

How to beat the big banks at the fee game?
Just join a Credit Union instead.
http://www.creditunionrevolution.com

November 02 2011 at 7:21 AM Report abuse rate up rate down Reply
Jay Gould

We shouldn't lose sight of how this whole thing started. All these debit fees banks are now rolling back were introduced in response to the fall in bank revenues from debit card transactions that was the consequence of the passing of the Durbin Amendment to the Dodd-Frank bill and the subsequent Federal Reserve ruling to limit debit interchange at $0.22 + 0.05% of the transaction amount.

Those of us who were paying attention to what was happening knew that this was coming and warned against it. Here is one of the things we wrote at the time: http://blog.unibulmerchantservices.com/banks-may-limit-debit-card-transaction-size-to-fight-fee-limit

What happened was that the government decided that a substantial portion of the banks' revenues would be collected by retailers. The banks then decided to make up for the shortfall by creating new revenue sources. Is that surprising?

The bottom line is that the banks will find a way to make up for their lost revenues and their customers (i.e. us) will foot the bill.

November 01 2011 at 7:17 PM Report abuse rate up rate down Reply
Michael

Laura! Hello! Wake up! Most people don't have $40,000 that they can leave laying around on deposit. The local banks and credit unions are already starting to charge the fees, and they will continue to go up. No bank large or small can afford to support small checking accounts that have very little money. Up to now the large banks have had the bulk of these low balance accounts. As they migrate to smaller banks, which are much less able to absorb losing money on them, the fees will appear. Get ready. There is no free lunch.

October 31 2011 at 9:55 AM Report abuse rate up rate down Reply
ArronAdamJivanni

I am very upset that Bank America sold our morgage to another company....Green Tree....BA bails out and we get stuck with some company we do not know anything about.....and did not give permission to do so?????BA could of asked us if we wanted a certain compay to bank with.........this is unfair.........L

October 31 2011 at 9:19 AM Report abuse rate up rate down Reply
1 reply to ArronAdamJivanni's comment
DrBob

You did give permission when you signed the loan documents. It's in there. Banks sells their Mortgages to other companies all the time. The loan originator gets its money from the closing and filing fees. The new mortgage company gets it over the long term in interest payments.

October 31 2011 at 9:30 AM Report abuse rate up rate down Reply
straveler222

now if someone would just tell us how to beat thses so called ewxperts that do not even do any research, just write articles like this with out a clue in the world, sure wish I could get paid for being as stupid as this writer

October 31 2011 at 4:00 AM Report abuse rate up rate down Reply