Battle Bank Fees
Banks love fees. Want to wire money? Need to pay a fee. What to stop a check? Need to pay a fee. Need to use the bathroom? Gotcha!
Banks earn billions of dollars each year on fees. At first, they snacked on fees. They let business go as usual and accepted whatever fees arose out of errant customer behavior. Eventually, they came to rely on these fees and shaped their own processes and protocols to maximize fees. Remember how banks started cashing checks in order of size, rather than some other, more reasonable, method like the order in which they came in? By cashing the larger checks first, they increased the probability of an overdraft (cha-ching!). An overdraft meant fees! Fortunately, the government has pushed back on that sort of behavior but fees still remain and they still punish customers to the tune of hundreds of billions.
As part of my Foundation series covering the Basics of Banking,, I uncovered a lot of interesting information about banks and the banking industry including how insidious bank fees were. Here's a list of the three most common bank fees and how you can easily avoid them.
Overdraft fees: An overdraft fee is charged when you make a financial commitment (a check or debit card charge) you can't fulfill. When you write a check for more than the amount you have in the bank, you'll get charged an overdraft of insufficient funds fee. Do it more than once and the fees get larger each time. These fees are the easiest to avoid because they're the result of carelessness, you need to keep close tabs on how much is in your account. At the back of your checkbook there should be a "check register," a little pad you can use to record transactions and maintain an accurate checkbook. By keeping an up to date check register, including debit transactions, you can practically prevent these fees from happening.
ATM fees: Whenever you use an ATM that isn't affiliate with your bank, you will get charged ATM fees. First, the ATM owner will charge you a fee. Then, your bank may charge you a fee. Some banks will refund you these fees if you satisfy certain conditions, like a direct deposit or a minimum balance. If you find yourself paying these fees often, I'd switch to a bank that offers to refund these fees.
Minimum balance fees: Many "free checking" accounts will have a minimum daily balance requirement. If you fail, even for just one minute, to have a daily balance above this minimum, they'll hit you with an "administrative" or minimum balance fee. To avoid this, just avoid all accounts with this requirement. There are plenty of banks that offer free checking without a minimum balance requirement and you should never subject yourself to that requirement.
If you are charged a fee, try to ask for it to be waived. If you do happen to make a mistake, it never hurts to play nice and ask them to waive the fee. Many banks have policies where they are willing to waive your first transgression (how nice!). If you have multiple overdrafts, you might be able to work it down to one, the first. It never hurts to ask and it can save you a bundle.
As a consumer, I think these bank fees are unfairly punitive and much higher than what the bank pays to handle them. As a taxpayer and unwilling investor in many of the banks in America, I think maybe these bank fees aren't high enough! What's the worst fee you've ever been dinged for?
Jim writes about personal finance at his personal finance blog, Bargaineering.
(Photo: mexifelio)
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I am with a credit union. I pay $3 per overdraft (when it draws from my savings into my checking, rounded up to the next $50). We do have a minimum balance to maintain in our free checking, but with several ways around it: it's waived if you use direct deposit (as many people direct deposit the paycheck, pay bills, and move the rest to savings right away) or if you choose a "restricted" account (only 1 or 2 monthly teller visit, etc.).
There are 7 locations in my city proper (of 120,000ish people), including one at the airport, one I can walk to from my house, and one my husband can walk to from work downtown. More than 100 proprietary (no-fee) ATMs in the area, including one in my workplace. Excellent online access (easy to use, full range of services), friendly locations where the line moves pretty quick, no attempts to discourage you from using tellers. Competitive rates on savings and borrowing products. So it's not a hassle to use; it's more convenient than most of the local banks, actually.
All that, and their kiddie accounts come with a financial curriculum parents can use to help kids learn about saving and money management! Oh, and they have financial planners on staff, salaried by the credit union, that any member can take advantage of, free, to do some financial planning. The CU doesn't sell any of the products, so there's no commission or anything involved. (Flipside, you have to go find your own way to invest, etc.) And I get a check at the end of the year when the credit union pays member dividends.
So use a credit union (hi, HomerJay!) and escape the worst of this stuff.
Also, you can avoid overdraft and have some emergency money by keeping a buffer in your checking account. When my checking account says "zero" there's actually $300 in there. Since it's a joint account for me and my husband, occasionally there's a miscommunication on recording things in the register. And on one or two occasions, I've written a check, meant to go right home and transfer the money, and forgotten. (This does, of course, require $300 in emergency funds, which isn't possible for everyone.)
Join a credit union! We pay $1 a month flat on joint acct. for the use of our debit cards. and we use the debit cards every day. They do have overdraft fees, if you mess up. But most (around here in Midwest anyway) also offer internet banking, direct deposit, web bill pay, all the perks of big banks, with much less cost to the consumer. (and no, I am not, nor any family members, employed by a credit union!)
Alas, if only the wire transfer fees were as easy to avoid. --One of the reasons I chose my bank in Norway was because it didn't charge me for wire transfers. Unfortunately, Bank of America still charges $25 to receive them. Of course, in a few months, I'll have my credit cards paid off and instead of transferring money every other month, I'll be able to get away with only doing it a few times per year.
Keep around $40 cash in your pocket as religiously as you wear clean underwear. You'll be amazed at how quickly those macro-overdraft fees for micro-purchases disappear.
Corollary: when clubbing/barring, figure out beforehand how much you'll spend and cash it out. Leave the plastic at home. When you tap out (and you know you will, lush), shrug and make your friends step to the plate and buy their freaken' round.
anybody who qualifies for a credit union yet still deposits their money into a bank deserves to be hit with every fee they qualify for.
make the banks pay for their share of the current financial crisis by closing your account and moving it into a credit union. the benefits are numerous and obvious.
@Eyebrows McGee: Amen regarding credit unions. When a financial institution is not-for-profit, the impetus to slap fees on everything is greatly reduced. I left my local bank for a credit union ten years back after the local bank was bought by BB&T. Not only did I stop having to pay so many fees, but the credit union's rates are superior.
For those who are interest in switching, try a credit union locator: [www.findacreditunion.com] or [www.ncua.gov]
That fee irks me to no end. They are charging me a fee so that I can put money into my account there?!?! It's insane!
@Eyebrows McGee: Credit unions are good, but if you are regularly going between two or three states they aren't exactly easy to use when you are spending a few days a hundred or two miles from the nearest branch.
@Oakie Pokie: Not for everyone. I regularly go between a couple of states and it is nice to be able to walk into a bank and get money hundreds of miles from home. Then again, I am using a fairly decent bank - TD.
Another way to avoid or minimize ATM fees is buy something at a store where you can get cash back when using your ATM card for the purchase. Sometimes you'll get a POS fee but it is typically much lower than an ATM fee. I've used this a couple of times when on travel where even the Credit Unions were charging high ATM fees.
If you use ATM's a lot, see if your bank is associated with a fee-free ATM network. The credit union I use only has a handful of ATM's (although one is in my workplace), but is affiliated with Allpoint ATM network as well as 7-11's ATM network - I can use ATM's in those places fee-free.
Another way to avoid overdraft fees for micropurchases is to use a credit card instead - assuming that you are responsible enough not to charge more than you can pay in full at the end of the month. You get a couple week grace period, some additional theft/fraud protections, and can often get some rewards if you use the right card.
I do use a credit union, and while I am generally happy with it, it does have it's drawbacks - most noticeably no weekend hours, and only open past 4:30 one night a week. Lots of retail banks have better hours.
@Plates:
Irrelevant.
Credit union ATM cards (Credit Union Co-Op) are capable of accessing the STAR network, thus the largest network of ATMs worldwide. I can go to other countries, let alone other states and withdraw cash.
Many credit unions will allow simple transactions at the counter for other credit union members, as a courtesy. Also you can deposit money into a Credit Union Co-Op ATM, just like you were depositing money to your home credit union's ATM.
Will BofA ATMs let WellsFargo users do that?
Right... and my credit union only has 3,560 locations
I can get money from... [www.cuservicecenter.com]
Oh yeah, my credit union will reimburse me for foreign ATM transaction fees. I just need to fill out a simple form online.
Will your bank do that?
@Oakie Pokie: There are people that dont qualify for an account at a credit union still? All of the ones I have been seeing lately have something like if one of the following applies you are OK: 1) Work At This Employer 2) Work around This Employer A 3) Live in This City B 4) Go to Church in This City.
And no, local "clubs" to store my money with are not more beneficial to me over a national network.
@ken2148: Wait! Credit Unions do nothing wrong! They are great! There are no ATM fees with them! Try Chase- National Network and NO POS DEBIT / DEBIT CASH BACK FEES.
No fees for me (not even ATM fees!) with my lovely Charles Schwab bank account. Ohh, did I mention I also get interest?
@bahalana:
That astounds me also. A vast majority of overdraft fees can be prevented by keeping track of cash flow in and out of that account. It's easy and registers can be maintained in a checkbook, spreadsheet, notepad, computer software, sheet of paper or anything else that works.
Online savings accounts are a great tool also. The only disadvantage though is that transfers can take 2-3 days, at least with FNBO direct.
@Oakie Pokie: Thanks for your unbridled disdain for bank users, as it motivated me to look up banks vs credit unions. Unfortunately, though the benefits of CUs may be numerous, I do not think they are obvious in the sense that a lot of people really do not know about them. In any case, I thank you, as my research has begun. This article isn't the most recent, but it's a start: http://articles.moneycentral.msn.com/Banking/BetterBanking/DitchYourBankForACreditUnion.aspx
twitter.com/mas2124
One thing I'm always shocked not to see here is that with most banks you can ask (in writing, sadly) to not be allowed to overdraft.
We messed up once and had the old overdraft mess, after that we send in the letter and now if we don't have the funds then it's rejected which to me is better than going all day making small purchases and racking up $35 fees each time you buy a $1 pack of gum.
@Tallanvor: It astounds me how high wire transfer fees can be... but at the same time I know the amount of verification and filtering a bank has to do in order to before sending a wire transfer through or accepting it (because of BSA, Patriot Act, etc.)
If they were $10 instead of $25, I could live with it. But know this: banks charge each other and big business a lot for wire transfer fees to. (they might get volume discounts, but not by much).
The article is completely worthless. I have had some experience with unfair fees though:
Deposit check for $5000 and find that 5 checks bounced with resulting $35 fee for each. I investigated and found that the 5K check had cleared BEFORE any of the bounced checks got to the bank, but the bank tweaked the transactions so that the checks were processed before the deposit. The check had cleared but it cost me $175. I got no satisfaction when I called about it to get it reversed.
Credit Unions are no better. I was scammed into continuing insurance on a loan after it was paid off and it cost me hundreds of dollars before I could get it stopped. In fairness the insurance was with a third party, but I blame March Federal Credit Union for pushing the scam.
@Jesse:
Okay I'll be honest. I don't use that little check register thingy, and I forgot it was back there.
But that's because I don't write checks. They're terribly antiquated. On the off chance that I have to make a payment where I would prefer not to disclose my credit card information, I use online banking to send an electronic check.
I use Quicken and my checking accounts all have an entry "transferring" money into my emergency fund (it's really just a category in Quicken). My registers in Quicken always show at least $500 less than I actually have in the account. Makes it very easy to avoid violating minimum balance requirements and NSFs. If I ever need to start cutting into that cushion, I'll already be in a position where I know I'll need to be watching balances even more carefully.
This approach is painless and has worked quite well.
@Plates: I can't really think of any banking I do in person other than depositing the occasional travel check (regular checks direct deposit) and I don't even use ATMs. So it doesn't really make a difference to me.
@cv: And if my ATM card gets demagnetized or my wallet is lost/stolen and I am 100 miles from the nearest branch I guess I am S. O. L.
Keeping track of your transactions in a checkbook doesn't do anything to help avoid overdraft fees when the bank delays deposits and debits from being processed for two or three weeks at a time, then suddenly processes them all in one day in an order that guarantees the highest number of overdrafts.
BB&T did this to me and many people I know. I'd never even consider banking with them again.
I have never had a demagnetized card, nor have I lost my wallet since I was in grade school.
Anyhow, I primarily use credit cards, not my credit union's Visa debit card (which I still carry with my anyhow).
If your ATM card has a tendency to get demagnetized or you lose your wallet rather frequently, stick with your bank. And be accepting of shelling out more fees for your big, multistate bank. For you, it's worth it.
Overdrawn? How can that be? I still have Checks!
/waves checkbook around for everyone see...
Actually, those are service center locations. If the back of your card has the Co-Op Network logo, you have access to over 28,000 surcharge-free credit union ATMs.
Since my credit union reimburses me for non-network ATM transactions, I can basically use any bank's ATM without paying a dime.
@aguacarbonica: I'm bothered by the fact that people don't place any value on checks anymore. Just because they aren't as fancy as the shiny new platinum card with a picture of your dog on it does not mean it has lost its value. Checks, to me, seem more secure. A waiter or checker can easily swipe your card with their own device and steal your number. If you have an RFID chip in your card, someone standing behind you in line could grab that info without you even knowing. Sure, it's highly unlikely, but it's more unlikely that someone would be able to forge one of your checks. Second, it's less risky from a psychological standpoint. You may notice that when you pay in cash, you or someone you are with will take an extra second to consider getting something. That's because they are giving up wealth in a tangible form. You are dealing with the debt right off the bat. It's the same with checks. If you hand over that paper and record in your check-book, that fact that you just handed over your wealth registers, whereas a card is swiped and returned. You don't even have to sign if your purchase is under 20 dollars (where I live anyway). You really don't have to consider what you did. Finally, if one pays with checks and records it they know it's over with. There's no bill, no interest, no late payments, it's now yours. Obviously if you overdraft then you're out of luck, but I'd rather pay a 30 dollar fee than 30% of my purchase. Actually, one more thing. When you buy online and use your card (rather than using a site that allows you to mail payments) that site will often store your number for their records or future use. The more places its in coupled with the fact that it's online makes theft a lot more likely. For all these reasons, I use my credit card very sparingly and use cash and checks whenever possible.
Those "money cushions" people suggest don't work for the large part of the population who are living paycheck to paycheck either. Not saying that's an ideal way to live at all, but most people dinged for these micro purchases don't have an extra $500 to ignore in their account. These are the people who are affected most by some of the banks ridiculous fee policies, especially the debits before deposits and reordering of debits and the ones who can afford them least.
I just got a no-fees bank account. Still have to pay a fee when I use a ATM machine that isn't affiliated with the bank I'm with. This usually isn't an issue as being a student who commutes to school, and brown-bags my lunches the cash tips I get from work each week are enough for my main expenses, bus tokens and the occasional lunch when I had to leave in a hurry.
The overdraft fees are the ones that get me. I hate those. I try to keep a cushion, but like everyone has said, it doesn't always help when the bank processes debits and checks the way they do. That needs to stop. I'm not very good at keeping my balance straight, either.
I don't like ATM fees either.
I hardly write checks either. My daily activity is normally run though a credit card which I pay off every month. It makes keeping records easier since there are fewer transactions going through the checking account and thus requires less effort to track down expenses (albeit, it simply moves the "what the heck did I spend here?!" questions to the credit card).
In terms of keeping a register, I have a spreadsheet setup in Google Docs and update it every week or so. It's setup to automatically factor in a safety net so I can plan transfers from my online savings account when cash flow is tight.
@aguacarbonica: " On the off chance that I have to make a payment where I would prefer not to disclose my credit card information, I use online banking to send an electronic check. "
I do not understand this mentality. Why in the world would you rather disclose your bank account and routing number (which is on a check, and is transmitted by many online bill pay systems to the payee) versus your credit card information?
If someone gets your credit card info, it's not your problem. If someone gets your bank account info, you're in for a world of hurt.
@Oakie Pokie: Credit unions are great, if you're OK with only a couple locations and can get to them.
I work 120 miles away from where I live, and spend half the week traveling - so even though I belong to two CUs, I use a regional bank.
It costs me less, because I can find their ATMs all over the area I travel.
@tcp100: Oh, and furthermore.. ATMs in the STAR network do NOT substitute for a branch. When you get paid by clients (usually in large sums for 2-3 months of work), depositing at some random foreign ATM is NOT the safest or quickest way to make a deposit.
I tried that once, put a deposit in some random "network" ATM in some podunk town I was traveling through. Took three weeks to fully post, and when I called my bank to figure out what was up, nobody had a clue. You'd be better off mailing the check back to your bank / CU home branch.
@nightshade74: @nightshade74: @Micromegas: Date deposits the latest date you'll think they'll clear. Deduct all debits immediately in your register.
Never assume "float" on a debit. It is gone the minute you swipe your card or hand over the check.
My credit union is part of the Coop network so I can make withdrawls at virtually any credit union's ATM fee-free. My CU has ATMs and a branch at my work so I can make deposits there for the few times I need to make a non-electronic deposit.
If this isn't an option, I will go to the local grocery store which has a self-service checkout that rarely has a line. I'll buy a bottle of soda and get up to $50 back with no fee. Yeah, I'm paying for the soda but it's less than I'll pay in ATM fees and I get a bottle of soda.
On 'being unable to deposit a check when you're on the road with a credit union': Almost all CUs are a member of the NCUA, and have reciprocal deposit arrangements using member ATMs throughout the country.
Whenever I grocery shop, I withdraw enough money for the week from my card at the checkout at no extra charge. I've seen alot of ATM card fraud recently in our area so I'd rather use my card on a limited basis in places I trust. Cash is king.
Angie
I recently was charged a $6.50 "administrative" fee on my BofA checking account. As a follower of consumerist, I have learnt that apparently being nice works. So I put it to the test. I called up customer service and ever so sweetly and calmly asked what the fee was for. I was told it was due to a minimum balance requirement. I then, once again, very sweetly asked if there was anything that could be done about it, and by the end of the call (which took all of 3 minutes) I came out with a different type of checking account that wouldn't charge me a minimum balance fee, and a refund of the $6.50! Playing nice worked a charm - thanks consumerist!
@ztoop:
I also have a Charles Schwab Investor Checking account. I love that it reimburses all ATM fees and that it pays interest (currently 1.0%) I signed up for it about a year ago when they offered 4.0% interest and my credit union offered only 0.25% interest on checking. Now my credit union offers 3.0% interest on checking accounts with direct deposit, so I'm torn if I should switch my direct deposit.
I'm sorry, but the fact that you feel the need to tell people that there's "a little pad you can use to record transactions and maintain an accurate checkbook" to avoid overdraft fees is symptomatic of the reason this country is in the financial shape it's in. Good grief!
Besides getting nickel and dimed to death with fees, most banks are paying you zero percent or only slightly more even on savings. Check out some online banks like INGDirect, EmigrantDirect and HSBCDirect that pay higher interest on savings than most banks are paying on CDs. Not too long ago I was getting 5.15% on my regular savings account with EmigrantDirect. They also seem to be much less fee driven and transfers to linked accounts are free.