Banks are Banking on You Paying More in Fees This Year
February 23, 2009
The recession in the United States economy has compounded the problems that banks were already suffering from after the mortgage and credit crisis of 2008. Bank profitability is so poor right now that banks stocks are routinely trading down over 60% from their highs before the crisis. Bank customers need to watch their service and banking fees more closely than ever as banks are aggressively raising service charges and finding new types of fees to apply. Ten tips for consumers worried about the fees that banks charge include:
1. Watch Overdraft Fees
Banks make over $17 billion annually in overdraft fees according to the Consumers Union nonprofit organization. That works out to over $50 for every single person living in the United States. The overdraft fee policy of many banks is currently being reviewed by the Federal Reserve Board to determine if it is "predatory". But until the Fed passes overdraft fee reform, consumers should avoid overdrafts in their checking and savings accounts and expensive fees that are incurred. Just a couple of overdrafts a year can negate all the benefits of an interest-bearing checking account.
2. Check ATM Fees
Some consumers are hit with a double charge on ATM withdrawals from both their bank and the bank where they withdraw their funds. It does not take long for these $2 to $5 (per withdrawal) transaction fees to become significant. Many online banks will offer full reimbursements for ATM withdrawals at non-member banks, while other banks will waive charges from withdrawals at their own branches. Check your bank's fee schedule before using your debit card for cash.
3. Keep Enough Cash on Hand
Keeping enough cash on hand to avoid last-minute ATM trips is obviously easier said than done. But, making sure you withdraw enough money to cover your cash needs for a couple of weeks at a time is smart. You pay a lot less in fees to withdraw $100 once, than to withdraw $25 four times.
4. Know Big Banks Charge More Fees
Smaller community banks, online banks, and credit unions all generally have lower fees than large banks. Pay particular attention if your bank merges or is acquired by another bank because the fee structure will change!
5. Keep Track of Minimum Balance Requirements
Some banks will charge a fee if either the daily balance or the average daily balance during the statement cycle falls below a certain dollar amount. It is important to pick a bank checking account with a minimum balance requirement that accommodates your normal banking activity. For online banking customers there are many banks offering online checking and online savings accounts with a generous $1 minimum balance requirement.
6. Avoid Stop Payments
Placing a stop payment on a check can be very expensive. Before calling the banks to stop a check consider if there is another less costly alternative.
7. Avoid Wire Fees
Wiring money is the quickest way to deposit funds. Although wiring funds may be necessary for important transactions like real estate closings, because the both the receiving and issuing banks can charge up as high as $50 per wire it is very expensive.
8. Watch Check Cashing Fees
An unpleasant surprise for many workers has been that their paycheck or check for professional services cannot be cashed at the bank from which the check was issue without a fee. Whereas previously only an ID was required, now many banks are charging for this convenience service. Direct deposit is a solution that works well for many workers.
9. State Unemployment Debit Cards
About 30 states are using unemployment debit cards to distribute unemployment benefits. Because the states decide which banks to use, the unemployed workers can be subject to fees when using their cards out-of-network. The quick solution is to visit a branch in person to withdraw fees and avoid using ATMs
10. Monitor Your Bank for Fee Increases
Now more than ever consumers need to constantly monitor their bank statements and account disclosures to verify that the fees and service charges from their bank have not changed. This means reading the fine print and account statement stuffers, but will save you money in the long run.
