Banks can be surprisingly expensive places to do business, but many people don’t pay attention to what their bank is costing them. Banks provide you services which they change for. In tough economic times, you really should check the costs of those services.
As we all know, most banks were hit very hard by the melt-down in financial markets last year. The banks, through their investment arms, had engaged in risky investments, and those that had the largest portfolios of those investments either collapsed or had to sell assets to survive.
Banks make money in two ways. They invest the money you deposit with them, and they charge you fees for the services they provide to you. There is not much you can do about their investment decisions, but you can and should look into the fees they are charging you.
Bank fees have been going up each year. Their fee changes are usually buried in the small print of the notices they send you, and most people don’t try to wade through those paragraphs too often. But, just like other services, you should make an effort to compare prices between your current bank and others out there.
Fees for any one of the services listed below may seem small, but together they can add up to a nasty monthly cost.
Late fees, over-limit fees, and unpaid balance interest on credit cards can be amazingly high. This is a profitable area for banks, who love to tempt consumers to spend more on their credit cards and carry an unpaid balance. Politicians in the US and Canada have talked about legislation to limit these charges, but the chances are good that banks will find a way around it.
If you are serious about saving, a very good place to start is with your credit card. Pay it on time, don’t go over your limit, and work to get your unpaid balance down to zero.
If you write a check and it bounces, you will be charged an overdraft fee by your bank. In the US, the national average overdraft fee is approaching $30. You should know that the bank may present your check several times before you become aware that it has bounced, and that can quickly add up to lots of money.
Know what you have in your account before you write a check! When you write a check that bounces, you are trying to spend money you don’t have, and the bank will add to the pain with its fees.
It used to be normal to pay an annual fee to use a credit card, but intense competition to attract customers during the easy credit boom caused most institutions to drop the fee. Signs are, those annual fees are coming back. All the banks need to do is give you notice in writing that they are now charging an annual fee on your credit card.
Pay close attention to any written communication from your bank.
When they introduced ATMs, banks claimed the devices were a cost-reduction measure because they would need fewer teller windows. This would result in you, their customer, being spared higher fees and you would benefit from 24/7 access to your account.
The account access part was true. But banks quickly began charging fees for ATM service and those fees are continuing to rise.
Try to avoid using an ATM that is not owned by your bank, because there is a good chance you will be charged for the use by both your bank and the owner of the ATM!
If you use ATMs for cash withdrawals, one large withdrawal is a lot less costly than a series of small withdrawals. Withdrawing $20 and being charged $3 means you are paying 15% to access your cash! Withdrawing $200 and being charged $3 on the transaction drops the cost to
Is your checking account free? It may have been when you signed up, but there is a good chance that has changed without you being aware of it. Take a close look at your monthly statement, and see if there are any fees you don’t understand. If you keep statements from a year or two ago, compare them with your latest statement to see what might have changed.
Always remember that banks (and credit unions) can make money by lending or investing your money, and they can make money by charging you for the services they provide to you.
The days of “easy money” for the lending and investment arms of banks are gone. This makes it a near certainty that banks will be looking to raise every fee they believe they can get away with, so make sure you are tracking these expenses.
You always have the option of finding a new bank, if you don’t like the way you are being treated by your current bank. With a bit of shopping around, you may still be able to find a bank that offers zero monthly fees, no minimum balance, and no limit on the number of transactions you can have.