Ways Consumers Can Avoid Or Minimize Bank Fees | Independent Newspapers Limited
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Ways Consumers Can Avoid Or Minimize Bank Fees

Posted: Oct 4, 2015 at 12:01 am   /   by   /   comments (0)

Personal FinanceBank customers may not really know how enormous the little fees, being collected by their banks on services such as overdraft and online bill payment, could amount to until when they take the time to compute it. This may in the long run affect their income and their ability to save and invest more.

According to Teresa Mears, an editorial consultant and founder of the digital startups Miami on the Cheap and Living on the Cheap, there are ways consumers can avoid or minimize these Bank fees.

“If you think bank fees are getting higher and more numerous, you’re right. A new study by WalletHub of 35 large banks found that the average consumer checking account has 25 different fees, and the average customer pays about $470 in fees every year.

“Bank fees are getting more expensive, and they’re getting harder to avoid,” says Richard Barrington, senior financial editor for MoneyRates.com, which found in a 2015 survey that monthly maintenance fees for checking accounts have risen 8.36 percent in the past three years, twice the rate of inflation, and that only 25 percent of checking accounts did not charge a monthly fee. “Checking is getting more expensive, and it’s getting harder to avoid the monthly maintenance fee,” he says.

Bank fees can include monthly maintenance fees, overdraft fees, online bill pay fees and returned check fees. You probably also will pay to send or receive wire transfers, get cashier’s checks or money orders, and you may have to pay for mailed delivery of statements, online access to old statements, downloading financial data into a program such as Quicken, copies of canceled checks and going into a bank and talking to a human. Accounts you rarely use can accrue dormant account fees or bad address fees.

While the number of fees is increasing, and the fees themselves are rising, it’s not always easy to know before you open an account exactly what fees will be included. “They’re not all disclosed, and they’re not all disclosed upfront,” says Jill Gonzalez, an analyst for WalletHub, which recently analyzed checking account offers from the 30 largest banks and five largest credit unions that offer online applications.

The large brick-and-mortar banks offered clearer disclosures than the online-only banks or credit unions, the study found, but it was impossible to do complete comparison shopping with the information disclosed online.

“If you really want the ins and outs of these checking accounts, you’re going to have to get to a phone and hopefully talk to a human,” Gonzalez says.

Consumer advocates are pushing the Consumer Financial Protection Bureau to require for checking accounts the equivalent of a “Schumer box,” the standard disclosure that is required for credit card fees and named for Sen. Charles Schumer (D-N.Y.). So far, about 30 banks, including the 12 largest ones, have voluntarily adopted such a disclosure, says Susan Weinstock, director of the Pew Charitable Trust’s consumer banking project, which has advocated for better disclosures and more reasonable fees on consumer checking accounts.

“One of the things we would like to see is fees that are more upfront,” Weinstock says. “What we want to see is a competitive marketplace where the consumer could fully shop around.”

By far, the most lucrative channel for banks is the overdraft fee. Overdraft fees average $35 per occurrence. Each swipe of a debit card, for example, is an occurrence, meaning that if a check you deposit bounces and you spend $5 on coffee, $6 on a sandwich and $12 on a movie, you could be hit with more than $100 in overdraft fees.

Banks often reorder the transactions, putting through the highest one first so you go in the red faster, creating more overdrafts and therefore more fees. Several consumer advocacy groups are pushing to put an end to this practice. Pew found that 58 percent of large banks also charge what’s called an extended overdraft fee if you don’t pay the money back within a few days.

Here are ways consumers can avoid or minimize bank fees

Choose no-fee checking and savings accounts

If you shop around, you can still find a free checking account, though you may be required to maintain a minimum balance, have other accounts at the same bank, agree to electronic statements or have your paycheck direct-deposited. Make sure you do what is required.

Opt out of overdraft protection

One way to avoid overdraft fees is to opt out of what the banks call overdraft protection. If you opt out, and you don’t have the money in your account, your transaction will be declined, so you won’t incur an overdraft fee. In 2010, the law changed to make opting out the default, but banks will push you to opt in by framing overdraft protection as a consumer service. “It’s just too expensive,” Barrington says. “It’s protection in the same way some underworld enforcer will offer you protection.”

Sign up for alerts

Most banks let you get alerts via text or email if your balance goes below a threshold you choose.

Avoid ATMs that are not part of your network. If you use an out-of-network ATM, you may be charged by both the ATM network and your bank. Take your ATM habits into account when you choose your bank or credit union, especially if you need to withdraw money in multiple cities. Know what ATMs are part of your network. Apps can help you track down in-network ATMs. Remember that you can often get cash back with no fee at grocery stores or other retailers.