With Savings Interest Rates Low and Bank Fees Rising, Customers Must Take Care
October 07, 2009
| MoneyRates.com Senior Financial Analyst, CFA
A Closer Look at Some Bank Fees... and What They Do to Your Savings Rate
Banks are raising their fees for a variety of customer activities, from ATM transactions to simply having an account. If you think these fees don't matter much, take a closer look. Under some circumstances, fees can exceed your savings rate or even wipe out a checking or savings account balance.
Here are some things to think about when you look at bank fees:
- Maintenance fees. These are the monthly fees some banks charge for maintaining certain types of accounts. An $8 monthly fee is not unheard of. Sound harmless? An $8 fee for 12 months totals $96; if you have a $500 average balance, you've just paid nearly 20% for the privilege of giving the bank your business.
- Overdraft fees. At over $30, some overdraft fees are pretty hefty, but what really makes them add up is that they can be charged for each occurrence of an overdraft. So, if you accidentally miss a deposit and write five checks on funds that aren't there, you could be looking at total charges of $150 or more. These fees make it all the harder to get out of the overdrafted position.
- Overdraft protection. If overdraft fees scare you, you might like the idea of overdraft protection. This might cost you a $30 annual fee. Unfortunately, people who worry about overdrafts typically have low average balances. If your average balance is $200, then that $30 annual fee is like a negative 15% yield on your account.
- ATM fees. Paying a buck or two at the ATM may not seem like much, but on a $40 withdrawal, a $2 ATM fee is 5%. Remember, this isn't for borrowing money--this is just for accessing your own money.
Understanding what bank fees really represent can help you choose a bank with a reasonable fee structure, and manage your banking behavior to minimize the impact of those fees. With savings account interest rates and other bank rates generally low, you need to make sure you are not giving back what you earn from the bank.
Source:
Jean Chatzky • Get the low down on higher bank fees • Sep 04, 2009 • ABC news: http://www.abc2news.com/content/financialsurvival/yourmoney/story/Get-the-lowdown-on-higher-bank-fees/haPmYxUHS06OvQvzQsX3Rw.cspx?rss=702
