During my day job as a financial counselor, I periodically review client’s bank and credit card statements. Most of these review sessions end with the same items sticking out no matter whose account I am looking at. Those items are bank fees.
Fees (overdraft, credit card interest, etc.) are fairly easy to overlook as they are often small and typically debited right from your account (how convenient). They also consistently erode your income available for debt repayment and/or savings. Therefore, you need to find ways to avoid these budget busting fees. Here are some common ones and tips on keeping them off of your statements.
Overdraft Fees
This is BY FAR the most common fee that I see. When you are living paycheck to paycheck, it is easy to get pretty close to a $0 balance in your checking account. You may even find yourself praying that your paycheck gets direct deposited before that check for your child’s daycare bill gets cashed.
These fees vary depending on your bank, but can be upwards of $40 per occurrence. So, if you go below a $0 balance and continue to purchase or write checks, you will be hit with that fee each time. Personally, I have seen several individuals with 8 – 10 of these fees per month.
How To Avoid: These fees can be difficult to avoid if you are living paycheck to paycheck. However, your first step should be to create a budget. By sticking to a spending plan, it should be easier for you to understand what is coming out of your checking account and when.
Another step to take is to link a savings account to your checking account. Most banks these days will allow you to link the two together. By doing so, if you overdraft your checking account it will automatically transfer funds from your savings to cover the debit. This will in turn help you avoid the overdraft charge.
If you do not have any savings, just call up your bank and tell them to flat out deny any transactions that will take your balance below $0. This will not work for checks but it can work for your debit card purchases.
Late Fees
Late fees on credit cards can be a pain for a number of reasons. The first reason being that they are costly at up to $30 per occurrence. However, the second reason may be more costly than the first.
If you have a shoddy payment record (i.e. numerous late payments, etc.) with your credit card company, they may increase your interest rate. Some of these new rates top 30% which can make it extremely difficult to get ahead on your debt elimination plan. Thanks to the 2009 CARD Act, companies can no longer increase your interest rates retroactively on old balances but they still can for new purchases as long as they give you at least a 45 day notice.
How To Avoid: These fees can be hard to avoid if you just plainly do not have enough funds. If you have tried cutting just about everything from your budget and still can not make your payments, you may want to check into credit counseling. These companies may be able to assist you with lowering your debt payments. Just keep in mind that this process will hurt your credit score.
If you just need more organization, start using an online calendar such as Google Calendar to help you remember your due dates. Personally, I set up the due dates on my calendar and tell Google to text me several days in advance so that I remember to make sure I get the payment in on time.
If somehow you still let a due date pass you by, give the credit card company a call. You will be surprised at what they will do if you ask.
ATM Fees
ATM fees can be a real drag on your checking account balance. For example, if you attempt to get out cash at an ATM not owned by your bank, most banks will charge you a fee. Oh, and the bank that owns the ATM will charge you another fee too. These can add up to almost $6 per withdrawal.
How To Avoid: Most online banks (such as Ally or ING Direct) as well as local credit unions do not charge you for the use of another banks ATM. However this does not change the fact that the other bank may still charge you. In cases such as those, you may want to find a bank that will reimburse you for those fees as well (I know that Ally does this).
Another technique would be to just stick to your debit card. I know that some people say that it is harder to let go of cash but I think it is easier (i.e. it burns a hole in my pocket).
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Now, the ones that I mentioned above are just some of the more prominent fees that I see on a daily basis. There are obviously several more that could be discussed in length but I thought I would save you the tiresome reading and just break them down nice and easy.
Checking Monthly Maintenance Fees => Get a free checking account at your local credit union
Interest Charges => Pay your balance off each month
Foreign Transaction Charges => Find a credit card that does not charge them
So, now it is time for you to check out all of your statements to see if you are paying any of these ridiculous fees. If you are, employ some of the tips mentioned above to get yourself out of the red and into the black.
P.S. To those of you who have been checking the site religiously for updates, I thank you for your patience. I have taken on some additional responsibilities at work that took up most of my time over the last month. Thanks for sticking around!
photo by: CarbonNYC