Defend Yourself Against Higher Bank Fees
Partly to make up for bad mortgages, banks are increasing account and transaction fees. From USA Today:
Bounced-check fees, ATM fees, monthly service fees and balance requirements for interest checking accounts all hit highs in 2008, before adjusting for inflation, according to a survey released Monday by Bankrate.com., which tracks and compares bank products.
[...] consumers now pay an average of $3.43 to use another bank’s ATM, up 13% from a year ago (or 7% after adjusting for inflation).
It’s not just the size of the fees that hurt consumers. In the past year, large banks have also “substantially changed the design of how they charge those fees to get more revenue,” says Michael Moebs, founder of Moebs Services, a bank consulting firm.
More banks, for instance, are imposing lower fees for the first bounced check, but significantly higher fees each additional time consumers overdraw.
Frankly, most fees are a matter of customers just not planning ahead or paying attention - especially the ATM fees. If you’re withdrawing funds from an ATM that is not your bank’s, shame on you. Seriously, where’s the logic in paying almost a 10% penalty on a $40 withdrawal of your OWN money? Recently another blogger, Mr. Tough Money Love, found out that NFL games are somehow outside the normal space-time-money continuum (people will spend money on bad nachos at a football game as part of the “experience” - myself included!), but his son saw some interesting behavior at the ATM machines that I think fits here:
I learned about a new wasteful money expenditure last night from one of my sons. He had gone to the concession stand in the first half (for hot chocolate) and noticed that the line at the in-stadium ATM was at least 25 people deep. His girl friend had used the machine for free because she was a customer of that bank. (No, she did not buy beer.) Everyone else paid a $5 ATM service fee! So here we have fans during the first half of the game lining up to withdraw more cash and paying $5 to access their own money. No doubt that a lot of those expensive cash withdrawals were used to purchase more $7 beers. It gave me a sick feeling to even think about it. Paying $5 to access your own money in this situation is similar to taking a payday loan. The interest cost is astronomical.
Silly, isn’t it? Of course, after a few $7 beers, sound financial judgment goes out the window.
Back on topic, your goal should be to never pay a bank fee. If you tend to coast close to the edge of zero, apply for overdraft protection. If you go negative, you still have to pay but it’s only the interest on the amount you owe and only for the amount of time that you owe it - and it doesn’t matter if you went negative because of one big check or ten little ones. Contrast that with a $20 fee times ten bounced checks.
If you have a monthly service fee, ask your bank what it would take to get it waived. If they say that there’s nothing that can be done, shop around. If there is a minimum balance for an interest bearing account, figure out whether the interest is worth the fee - it may be more beneficial to change your account type to one that doesn’t pay interest but has lower fees or none at all.
If your bank offers a credit card with a cash back reward program and you believe you have the discipline to not go nuts, consider using the credit card to pay for many of your monthly expenses and set up automatic transfers from your regular checking account to your credit card account. For example, if you know you spend $500 per week on groceries, gas and entertainment for your family, use that card to get cash back and transfer enough money every paycheck to cover your costs. Remember, this one’s ONLY if you are disciplined enough not to use your credit card to overspend - the idea is to get a little cash back while NOT paying interest and NOT having your checking account hover near zero and risk overdrawing.
