Debit card annual fees: Why most customers shouldn't be charged.
Puneetkumar Pattar 04 June 2014

While many appreciate the progress from ATM cards to debit cards, there are many bank customers out there who do not see any real reason for shelling out a hundred rupees every year as annual fees

The banking industry has come a long way and today we are almost at a stage where everyone has a bank account. Those of us living in cities could have two and those living in metros could have even three to five accounts. I remember reading somewhere that the upper middle class has at least six bank accounts per family. From being a privilege for the wealthy and for those working in the Government services, banking has become a basic necessity of life. In fact, most parents get a bank account in the name of their as soon as they get him/her into school. How could they not? After all, a whole bunch of bankers run around them explaining the advantages of opening a child account, how it could help the kid become responsible, how it will help in education, and so on. The moment you open a bank account, a recurring deposit in the name of the kid and a life insurance policy are up next. That's okay. After all, the world is growing.


Banks want to have their cake and eat it too. Guess what, they have been successful at it.


Over the last many years, I have been looking at the changes happening in the banking sector. After computerization of the banking industry, banking has more to do with marketing than with calculations. The computers and software take care of all the calculations and thus, the banks are now better positioned to use human resources to generate revenue. Not so long ago, a bank employee would spend majority of his time in accepting deposits and making payments across the cash counter, making him a cost centre for the bank. Modern bankers (like ICICI Bank, HDFC Bank, etc) aggressively market their products by showcasing their services like ATMs, Internet Banking, Phone Banking, etc, making them a revenue centre.


Inter-bank fund transfers through internet banking attract charges too. Internet banking was supposed to benefit the bank by reducing the cheque clearing work, thereby leaving behind a lot of time for bank employees to work on other fronts. Its a different story that phone banking, which was supposed to help customers on a toll free number, is now offered on a paid line. So, all these services that came up to help customers have helped the banks more than the customers. Of course, no one can deny the many conveniences we enjoy today. The point I want to make is that all that was free, now comes at a cost.


Even an SMS sent to customers are subject to charges now. The SMS initiative came as a measure to ensure safe banking and now it costs the customers to ensure that he banks safely. Somehow, it doesn't convince me that my bank account is not safe with the banks with this paid SMS facility.


Debit Card Annual Fees - A trap?

Before declaring charges for their SMS facility, the banks introduced annual fees for debit cards. This one is perhaps the most annoying charge that today's customers pay. I personally had nearly 10 debit cards on my name up till some time ago (the side effects of working in the banking and financial services industry). One fine day, I realised that I had been paying a lot of money in the name of 'Debit card annual fees'. At Rs110 per card, I had been paying almost Rs100 a month. Since I would hardly use those cards I started closing those accounts one by one and yet, I was left with five of them. I was still stuck with paying Rs500 plus taxes for no sensible reason whatsoever.


Banks benefit more in terms of time and cost than the customers


Banks came up with the idea of ATMs in order to save time for customers and more importantly, for themselves. While customers do benefit from these cards, the banks benefit far more. Imagine the bankers sitting around and processing cash withdrawals of Rs100-1,000 to thousands of customers everyday in today's world.


A large number of customers still do not extensively use cards

It is a well known fact that a large number of customers who possess these cards, especially the ones in rural areas or the ones in business, seldom use these cards. Sole proprietors and, to some extent, Partnership firms have cash on hand, which they use for their daily expenses and this cash is received by them in the course of daily business. Most of their withdrawals are in the form of payments to third parties by cheques or transfers. So, the card lies in their pockets or lockers and they keep paying the annual fees.


Use of debit cards for shopping is very low

Banks promoted debit cards saying that these cards can be used at ATMs of other banks as well as be swiped at merchant terminals. However, the number of customers using debit cards for shopping is very low. Most customers who have a credit card would prefer swiping their credit card, thereby getting more than a month's time to pay the amount, rather than swiping a debit card where the amount goes off immediately. It is only when there are some offers, discounts, cash backs, etc that customers consider swiping their debit cards.


Five transactions only

The banks' promotion of debit cards quoting that these can be used to withdraw cash from any ATM doesn't appeal anymore. After all, only 5 such transactions in a month are free and the customer has to pay for the 6th transaction. However, banks have continued to offer unlimited transactions at their own ATMs even today.


Banks should bring back the ATM card

While adapting to technology should be encouraged, banks should also provide for such customers who do not want to use technology that doesn't help them. Its like asking a banker to learn Hadoop or Big Data, as they are the latest technologies. There are some banks who are still issuing ATM cards on request. In fact, I got an ATM card from one of the leading private sector bank on placing a request for the same.


There was absolutely no need for the bankers to do away with an ATM card and make the customers opt compulsorily for debit cards. An ATM card is a boon for those customers who do not use the ATM often or do not intend to shop with it. Banks are making big bucks with these charges but it is time they realize that they focus on tailored solutions instead of making generic products. While many appreciate the progress from ATM cards to debit cards, there are many customers out there who do not see any real reason in shelling out a hundred rupees every year. In fact, there are awkward situations when such charges result in a drop in balance, and such a drop results in a cheque bounce. Online consumer forums are full of such complaints.


Reintroducing ATM cards would be a friendly step to help customers who have too many debit cards, or those who seldom use them. Levying an annual fee on all cardholders could be legally permissible but when you look at it from the ethical or customer service perspective, it may not fly well with customers. Although, abolition of the annual fees in totality would be more of a dream for customers.

8 years ago
Hi I have heard that the so called free debit cards are also charged indirectly. I was told by someone that,when the quarterly or six monthly SB interest is credited to the account, this is netted off for the so called "free debit card" charges. Is that true?
8 years ago
SBI levies NEFT charges, SMS charges on Corporate salary accounts too.Can RBI inform the public about the various charges that a Bank can charge, if its applicable.Personally, my opinion is that the charges can be withdrawn.
Amiit Gupta
Replied to PRASAD V comment 8 years ago
yes prasad dear ,for that we have to fight then only they will start fighting against wrong procedure..
S Bethamangalkar
8 years ago
Banks should issue ATM instead of DEbit card as default and not charge for it.
Amiit Gupta
8 years ago
Can we raise this important matter to RBI & IBA like customer who use more than 05/10 transaction per month in any atm should charge X amount as debit card fees else no fees..banks are making huge money to take fees from all customers..Thanks Amiit Gupta
Tarak Shah
8 years ago
I still own an ATM only card of ICICI.
Charles Carvalho
9 years ago
Yes bank has taken charges to another level. Am charged 250 plus service tax for their debit card. The account was a 7% interest account that required a 1 lac minimum balance. At the time of opening the account they claimed that the card was free. Feel like a big fool who has kept a 1 lac fixed deposit for 7% and paid charges for doing so. Lesson learnt- yes bank, no sir!
Replied to Charles Carvalho comment 8 years ago
There are other hassles and traps too at Yes Bank. Better if consumers avoid it as a caution.
9 years ago
I have simple ATM cards from HDFC BANK and AXIS BANK which they issued in replacement of the debit cards when I insisted on having them. Some other banks like Indian Bank and IDBI BANK does not have this facility at all, and could not act on the reuqest. It must be made obligatory on the part of banks to issue simple ATM cards if the customer says that he/she does not need a chargeable debit card. But, how?!
Replied to forkarun comment 9 years ago
As far as IDBI concerned , one should not bother even if it is Debit cum-ATM card . There is no charge for it unless U R a SB privilege A/C holder.
Since last many years, I am having free ATM cum Debit card from IDBI.
Amiit Gupta
Replied to MOHAN SIROYA comment 8 years ago
if one bank provide the nice facility so why not IBA & RBI push to other banks also for the same like IDBI process..right Mr. Siroya..
9 years ago
Not only the P>A> charges for ATM Debit Cards are unwanted but I have a Current A/c with HDFC Bank where they even charge if the Withdrawal is from other bank"s ATM. which is rediculious and nonsense to levy as if I have to go to HDFC Branch it will cost them more
Replied to AJOY KUMAR SARAF comment 9 years ago
Mr. Saraf or others who hold the CURRENT A/C should note that for each and every thing they will have to pay in other banks too. No protection is awarded to them as Consumers, as the current A/C falls in Business catgory.
9 years ago
Very good article. I had the same experience with HDFC Bank where my ATM card was forcefully converted to Debit Card and I'm being charged for the Debit Card which I never use and I'm not given an ATM Card however ICICI Bank do provide an ATM Card.
p k Mohanty
9 years ago
Very well rsearched and analysed article on the issue. The point is banks are trying to short shift their small time customers to make up for the big dents made to their bottomline by corporate clients in terms of non performing assets. Small and sometimes essential services are charged without any logic, which should be reviewed in its entirety. P K Mohanty
9 years ago
service can never be have to pay for the convenience you are enjoying.those who want conveniences can opt to have no debit card.
Suresh Bisht
9 years ago
Good article. I have three debit cards issued by 3 PSU banks. They force us to take debit card even if you do not require (earlier there was no charge). Then start imposing cost. PSU banks charge lot of money even without informing customers. They just mention in some report that charges are revised. I noticed that all blames goes to private banks who fleece customer but PSU banks quitely raises charges. I think it is high time all PSU banks should be privatised and old employees should be compulsorily retired.
Sachin M Regundwar
9 years ago
I agree with Banks on one point that they need some amount to maintain their ATMs (card printing, rentals for ATM centers, security guards, money deposits in the ATM kiosks, etc.). But, keeping all these expenses asides, they saved a lot in terms of staff, stationary, maintenance in terms of crowds,etc. As a compromise, banks can do one thing. They may keep the cards free for those customers who has more transactions with them in a year. Those who transacts more with a particular bank, that bank may offer a free ATM card to them and those who transact very less say 4 times in a year may be charged for ATM card. I feel this may be good option for them to save them from any losses.
a mehta
9 years ago
I think it is not at all fair to charge the debit card fees. After all customer use debit card to draw money which otherwise they would have gone to the bank branch to do so. The banks are saving on staff, stationary, etc. Banks also have reduced the size of the branch premises because people go to ATM to draw the money. consequently they are saving on maintenance also. With all the savings that the banks do when customer uses debit card instead of personal withdrawal from the bank to draw money, why should they make more money by charging annual fees?
9 years ago
As Mr. Puneet Kumar rightly agreed that at bank's discretion this type of ATM cum Debit cards can be at a service fee plus tax. And once this right is conferred on them by RBI, no amount of cajoling by customers and or Activists will help for abolition of such fees, because these are easy earnings for them to boost revenue. But then there are also such banks who do see a point in not charging for this to the customers ,especially for small/SB account holders. One such bank is IDBI Bank.
Now let someone compile statistics to show that how banks earned more business and good will by not levying any annual fee for issue of such cards. Such statistical and factual analysis will definitely influence or motivate other banks too to consider abolishing this charge.
If not then in the interest of small and SB account holders ; the regulator(RBI) can withdraw this charge from the Bank's authority and direct them to issue only ATM cards without Debit card facility, when asked by the customers .
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