Being financially smart means keeping an eye on fees - all
fees.
Starting July 1, new federal rules kicked in that require banks
to require customers to opt in for overdraft coverage. Overdraft
coverage is a line of credit that kicks in when account holders
make purchases that exceed their available checking and debit
account balances.
To get customers to sign up, some banks are slashing their
overdraft fees. Under the new law, if account holders don't opt
in, banks won't be able to cover their charges when their account
balances fall short. The charge simply will be declined, and the
customer won't be charged an overdraft fee, which at some banks
had gone well over $30.
Yet if you have overdraft protection, that means you will have to
pay a fee, sometimes on a rising scale that takes you back to the
fee you were paying when you didn't opt in for such coverage.
So how do you avoid overdraft fees entirely? Start acting
responsibly.
Don't join, but keep an eye on that balance: If you don't opt in,
you won't be charged overdraft fees, period. But then it becomes
your job and your job alone to make sure your accounts are
covered. Redouble your efforts to record transactions and
double-check those balances. If you bank online, you can do this
every day if you choose.
Keep a particular eye on debit transactions:
Many in-store debit transactions will not automatically be
rejected, so that's why checking your account often is so
critical. That's why that if you don't use financial planning
software to download your transactions on a daily basis, it might
be time to do so. Checking your banking statistics at regular
intervals will not only help you keep an eye on overdrafts, it
will help you spot bank or personal errors and possibly identity
theft.
Sign up for bill payment alerts or keep a reliable
calendar:
Most banks and credit card companies will give you the option to
have bill payment alerts sent to you five or more days before
they're due. Even if you write these dates in a calendar, it's
not a bad idea to have backup.
What about other fees? Keep in mind that overdraft fees are not
the only bank charges you need to watch. Last September,
Bankrate.com released the following data on ATM and checking
account fees:
- NSF or bounced check fees rose to a record high of $29.58
in 2009, rising 2.7 percent annually on average over the last
decade.
- ATM surcharges - fees for when you use an out-of-network
ATM - rose 12.6 percent from 2008-2009 with an average fee of
$2.22. According to Bankrate, ATM surcharges have gone up at an
average rate of 7 percent a year since 1999.
- Interest-bearing checking accounts had fees averaging
$12.55 a month, up nearly 5 percent from 2008 levels, though
non-interest bearing accounts hit a new low of $1.77 a
month.
And don't forget these other nagging fees you should watch for:
-
Credit card fees:
Late fees, processing fees, and surcharges on cash advances are
just some of the fees that banks and credit card companies use
to increase their revenue. Just as you become more diligent in
examining your banking options, apply the same standards to
your credit cards.
-
Retirement plan fees:
If you work for a company, it makes sense to ask your human
resources department how much they're paying in fees to your
401(k) plan manager - or managers. As for your personal
retirement investments, check your portfolio management fees,
also known as assets under management (AUM) fees. These are
various fees that might be assessed against professionally
managed portfolios. It is always important to understand these
fees, see how they compare with competing types of portfolios
and investments and keep an eye on what triggers them.
-
Restocking fees:
Avoid retailers who charge restocking fees, particularly for
electronics. While certain chains have dropped them due to
customer protests, make sure you call the store or check their
sales policies online before you spend.
If you do a financial checkup every six months, it might not be a
bad idea to start examining the fees you pay to all sources and
determine whether there's a more affordable way to save, spend,
shop and invest. Weigh these options against any incentives you
might gather along the way.