If you’re looking for a debit card that won’t charge you fees to access your own money, it’s time to check out a range of no annual fee debit cards.

These cards let you access your money without paying a yearly or monthly fee, unlike some other debit cards that can cost you up to $100 a year.

How to avoid annual fees?

So the good news is that if you don’t want to pay annual fees on your debit card, you don’t have to! Some banks offer debit card accounts with no monthly fees, like the MyState account above, and others like the Virgin Money Go Debit Card, the Westpac Choice debit card account, or the NAB Classic with Visa Debit. Remember to compare each card and read our helpful, in-depth reviews.

If the account has a deposit requirement to waive the fees, make sure you’re fully aware of them. Some banks waive the monthly fees if you deposit a certain amount of money into your account each month, typically from $1000 to $2000. This could be your salary or other income like an investment property. For example, ANZ Access Advantage, Commonwealth Bank Smart Access and Westpac Choice have a $5 monthly fee that is waived if you deposit $2000 or more per month.

Look for your banks branded ATM or partner network. Some banks have partner banks in Australia that allow you to use their ATMs for free or at a reduced cost. For example, if you have a Westpac debit card, you can use St.George, Bank of Melbourne and BankSA ATMs without paying any fees.

Why do we pay annual fees?

An annual fee is like a membership fee that you pay every year(or month) to keep your card active. On debit cards this can also be known as a “monthly account keeping fee”. The annual fee varies depending on the type of card, what benefits are on offer, and who the issuer is. Some cards have no annual fee, while others can charge hundreds of dollars. Usually, the higher the annual fee, the more perks and rewards you get with your card.

Some cards may offer travel insurance, airport lounge access, cash back, or other types of insurances.

A trip back in time

Many of the systems that debit cards replaced, such as EFTPOS and cheques were charged on a per transaction basis.  Even taking cash out was charged on a per withdrawal basis. However, debit cards are processed a little differently. The merchant pays a fee to the card processor to process the transaction, and so although there is a cost of the transaction this is not directly paid by the bank or by the consumer. The card issuer isn’t making any money off your transaction.

So now that the businesses are paying fees to accept payment, they can either charge a transaction fee to process the payment, or they could simply include that mark-up in the total price. But the good news is that the Reserve Bank of Australia (RBA) has set some rules to limit the amount of surcharges that businesses can charge customers for using debit cards. According to the RBA, the average cost of processing a debit card transaction is around 0.5% of the transaction value. So how do the banks still make money from debit cards? Here’s some:

– Interchange fees: Banks charge each fees other when a customer uses a debit card from one bank at a merchant that uses another bank. The fees vary depending on the payment network (Visa, Mastercard, EFTPOST.) and the type of transaction (tap, insert, swipe, etc.). The fees are usually paid by the merchant’s bank to the customer’s bank.

– Merchant service fees: These are fees that banks charge the individual merchants for accepting debit card payments. These are usually a percentage of the transaction amount plus a fixed fee per transaction. The fees cover the cost of processing the payment and providing security and fraud protection.

– Account fees: These are charged to customers for simply having a bank account that’s connected to a debit card. The fees may include monthly or annual fees, transaction fees, ATM fees, overdraft fees, etc. The fees may vary depending on the type of account, the balance or the number of transactions you make.

Many debit cards are now offered without an annual fee.  This is partly because consumers now expect debit cards as a standard feature of a transaction account but also because many of the early adopters – particularly people who often went abroad or who would tend to shop on line – had already taken debit cards and so banks would compete on the low cost aspect of a debit card.

However although there are now many debit cards that do not have an annual fee, this may be disguised by the fact that the transaction account has a monthly fee.  Many transaction accounts now are free as long as a minimum amount – usually around $2,000 dollars – is distributed every month.

There has been a growth of prestige debit cards at the other end of the market.  These tend to offer some of the services that a gold or platinum credit card would offer and they tend to be attached to a full service transaction account.  These cards will still charge an annual fee in almost all cases.

There are other benefits that a no annual fee debit card will still have.  For example they are still accepted abroad wherever credit cards with the same logo are accepted.  With VISA and MasterCard these are both close to 30 million destinations.

No annual fee cards also benefit from the zero liability guarantees which both VISA and MasterCard will not charge unauthorised transactions to the card holder.