By CANDICE CHOI
AP Personal Finance Writer
NEW YORK - Americans prefer using their debit cards at the register. But a small fee could change that.
A new Associated Press-GfK poll finds that about two-thirds of consumers use debit cards more frequently than credit cards. But when debit card holders were asked how they would react if they were charged a $3 monthly fee for their debit card, 61 percent say they'd find another way to pay.
If the fee was $5, 66 percent would do the same. If the fee was $7, the figure rises to 81 percent.
The findings come at a time when consumers are seeing unwelcome changes to their debit cards and the checking accounts to which they're linked. Although banks haven't started imposing monthly fees for debit cards, there are signs higher costs could be on the way.
Starting in October, a new cap will sharply limit the revenue banks can collect from merchants whenever customers swipe their debit cards. That revenue has been a critical income source for banks; merchants paid issuers $19.7 billion for debit transactions in 2009, according to the Nilson Report, which tracks the payments industry.
Consumers are already seeing the fallout. Chase, PNC Bank and Wells Fargo ended or scaled back their debit rewards programs citing the new regulation. The availability of free checking accounts also declined last year for the first time since 2003.
And more changes could be in store.
Chase, for example, is testing a $3 monthly fee for debit cards on new accounts in northern Wisconsin. In Atlanta, it's testing a $15 monthly fee on basic checking accounts.
Among the AP-GfK poll respondents who say they would leave their debit cards in their wallets in the face of such fees, more say they'd pay with cash, 53 percent, or check, 42 percent, rather than another form of plastic.
"Cash or checks - they're not very expensive," said Aaron Alto, a 44-year-old resident of Grand Rapids, Minn. Alto says he'd be annoyed enough to look for an alternative to his debit card if the fees approached $10.
Debit card fees would cause 22 percent to switch to credit cards, and 12 percent say they would switch to a prepaid spending card.
For now, the notable preference for debit could be linked to a negative sentiment about credit cards; nearly half of respondents to the AP-GfK poll say the interest rates they're charged are unfair.
That may be because 30 percent had their interest rates hiked in the past two years. That's more than twice the number who say their rates were lowered.
Forty-two percent of respondents also say the fees and penalties on their cards are unfair; 37 percent say card issuers recently raised those potential charges.
The higher rates and fees may have surprised consumers in light of the new regulations that were intended to protect cardholders and put an end to questionable billing practices.
Under the rules that went into effect last February, cardholders are now entitled to 45 days notice before their rates are hiked. Card issuers are also prohibited from raising rates on existing balances, a once-common practice that consumer advocates had long decried.
Additionally, the one-time penalty fees for late payments are capped at $25 per violation. But there's no limit on how high banks can hike interest rates on purchases or the default interest rates that kick in when customers are late on payments.
Earl Law, a 61-year-old resident of Buffalo, N.Y., said the penalty rate on a few of his cards is 30 percent.
"It's absurd. It's usurious," he said. "If you're struggling with debt, that's the last thing you need. You're asking people to fail."
Despite the widespread discontent with interest rates, the regulations are having a clear, positive impact in one area: monthly statements. Nearly half of respondents say they're now easier to understand.
Part of the reason is that the new law requires credit card issuers to spell out the cost of carrying a balance. For example, statements now include a chart that shows how long it would take to pay off a balance if only minimum payments were made. The chart also includes the total amount the cardholder would pay over that time, including interest charges.
The increased transparency might be one reason why the majority of consumers - 78 percent - say they plan to stick with their cards, despite their grumblings about high rates and fees.
It could also be that consumers have grown numb to unpleasant changes. In the months leading up to the passage of the new regulations, many cardholders saw their interest rates hiked, credit limits slashed and inactive accounts shut down.
The poll was conducted June 16-20 by GfK Roper Public Affairs and Corporate Communications. It involved landline and cell phone interviews with 1,001 adults nationwide, including 715 who have credit cards and 706 debit card holders. Results from the full sample have a margin of sampling error of plus or minus 4.1 percentage points; it is 4.8 points for those with credit or debit cards.
Associated Press Polling Director Trevor Tompson, Deputy Polling Director Jennifer Agiesta and AP News Survey Specialist Dennis Junius contributed to this report.
Poll results: http://www.ap-gfkpoll.com