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Avoid Sneaky Debit Card Fees

If you regularly use a debit card, watch your bank statement to see if you are being charged point-of-sale fees. A fee is deducted from your account each time you swipe your card at the checkout register. An additional fee for using the debit card may also be deducted. This happens when you use the card as a "debit" and authorize the transaction with your PIN. You could avoid this fee if you press the "credit" key and sign your name on the receipt.

Using your PIN can really add up

In a survey conducted by the New York Public Interest Research Group (NYPIRG), 89% of the banks surveyed tack on a point- of-sale fee anywhere from 10 cents to $1.50 for PIN-based debit transactions. While this survey only looked at New York banks, consumers around the country are finding these debit card fees on their bank statements.

Like credit cards, retailers are usually charged a fee for the processing of a debit card transaction. NYPIRG says a flat fee of 7.5 cents is paid when the PIN is used and the transaction is processed "online". If the customer signs for the purchase, it is processed "offline" and the fee could be 2% of the transaction.

Because banks receive a significant portion of that 2%, they encourage their customers to treat their transactions as a "credit" instead of a "debit". Not only do customers avoid the fee they may also qualify for perks such as free air miles.

The downside of using the credit option is that consumers may end up paying more in the long run. Merchants are charged a transaction fee between 1% and 4% when the credit option is used. That cost will get passed on to the consumer either by way of higher prices on goods and services or direct credit card charge. There are only 10 states where this is illegal; California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. If you live in one of the other 40 states, you will dinged with the new "check out" fee.

Are fees adequately disclosed?

The Senate Banking, Housing, and Urban Affairs Committee has expressed concern that consumers may not be aware of the fees until they see it on their monthly statement. The Federal Reserve is taking a look at debit card fee disclosure and is giving the public a chance to lobby complaints.

Banks are required to disclose all charges in the account agreement (the insert you receive along with your card). The fee is also disclosed on your monthly statement as well as on the ATM monitor which tells you that you will be charged a transaction fee. However, there is no such notice on a checkout register keypad where most debit card transactions take place. Even if it is not technologically feasible to replace all of the keypads, there needs to be a notice placed near all machines disclosing the point-of-sale fee.