Rising bank fees have been in the headlines a lot lately, from formerly free checking accounts that aren't free anymore to charges for debit card usage and more.
Not only are fees like these annoying, but they can add up over time and make a big dent in your budget.
Here's a look at some common bank fees and how to avoid them.
1. Monthly Service Fees
Citibank recently announced that the fee for its EZ checking account will double to $15 a month in December. The fee was previously waived if customers maintained an account balance of $1,500, but now that will increase to $6,000. Fees for other Citibank checking accounts will be hiked, too, including one with a $20-per-month charge. That's $240 a year.
It's not just Citibank. BankRate.com says the number of free checking accounts continues to fall. Just 45 percent of noninterest checking accounts surveyed are free, down from 65 percent in 2010 and 76 percent two years ago.
How to Avoid Them: Many checking accounts offer alternatives to fee-based checking, such as maintaining a minimum monthly balance, using direct deposit or using online bill-paying services.
Ask your bank what you can do to avoid the fee. That's what I did after Bank of America announced it would start charging $5 per month for debit card use. The customer service rep told me I could avoid the fee by linking my accounts (personal checking, savings, business checking and an unused home equity line of credit), which classified me as an "Advantage" customer. They're keeping my business -- for now.
If you ask your bank for solutions and the answer is "there are none," it's time to move to a different bank.
2. Over-Limit Fees
Over-limit fees are charged when you overdraw your checking account, or when you charge beyond your credit limit on a credit card.
How to Avoid Them: Start by asking your bank to only process checks, ATM withdrawals and debit card purchases if there's sufficient money in your account. Not all will comply, but some will. Then see if you can get the bank to send emails or text messages as a reminder when your account balance falls below a certain dollar amount.
Another alternative is to open a credit line that's linked to your checking account, which would work as overdraft protection. If you put your account in the negative, money would automatically transfer from the credit line to your checking account so you won't be overdrawn. Just make sure you ask about any fees, and understand that lines of credit like these usually have high interest rates -- so pay them off quickly.
For your credit card, ask the lender to deny charges that would put you over your credit limit.
3. Late Fees
If a creditor doesn't get your payment on time, it may assess a late charge of as much as $50. This isn't just for credit cards; utilities, insurance companies, health-care providers and other services that bill you may institute a late fee.
How to Avoid Them: If it's your first time being late, call the business and ask it to waive the fee. Most will for first-time offenders.
If late fees are an ongoing problem, try these strategies:
- Set up an automatic payment that is transferred on the same day each month. You'll also save on postage.
- If you're on the computer each day, consider receiving your bills online so you have more frequent reminders to make a payment.
- Even if you like to pay your credit cards in full each month, pay at least the minimum on the day you receive the bill. That way you'll know a payment has been received on time, and you can send additional payments for the balance later in the month.
4. ATM Fees
If you use an ATM at another bank, you may be charged twice: once by the bank where the transaction takes place, and again by your own bank.
How to Avoid Them: If you need cash and there is no ATM for your bank nearby, you may be out of luck. Try making a debit card purchase in a store and asking for "cash back."
Also ask your bank if it will eliminate the fees -- unlikely, but if you're a good customer, you never know what the bank will agree to. Otherwise, consider shopping around for a bank that doesn't charge ATM fees, or one that will waive or reimburse the fees at the end of the month. Alternatively, switch to a bank whose ATMs are closer to where you usually find yourself when you need cash.
5. Inactivity Fees
If you have a little-used credit card or bank account, your financial institution may charge an inactivity fee.
How to Avoid Them: Ask the institution what you can do to avoid the fee. It may be as simple as making one small transaction a year.
Also ask yourself if you really need the account -- it must be inactive for a reason. If you don't need it, close it, but first make sure there are no account-closure fees.
Before you cancel a credit card, consider the possible impact on your credit score. I delved into the subject in this previous column.
6. Annual Credit Card Fees
Some credit cards charge an annual fee for the privilege of being a cardholder.
How to Avoid Them: If you already have a card with a fee, ask the lender to waive it or at least lower it. If that doesn't get you anywhere, start looking for a new card without an annual fee. Before you cancel the fee-laden card, remember to consider the impact on your credit score.
7. Annual IRA Fees
Many investment companies charge an annual fee if your IRA account balance is below a certain amount. With the falling stock market and corresponding lower account balances, it's possible your account's balance is now so low that you incur the fee.
How to Avoid Them: Stay above the minimum balance required by the investment company. Of course, you may not have a few thousand extra to toss into your account, so consider consolidating your accounts at the same investment company. You may be able to use the total balances of your accounts to qualify for a free account.
If not, shop around for a low-cost brokerage house that doesn't charge an annual fee, such as Schwab or Fidelity, and roll over your IRA account.
Bottom Line: Shop Around
Whether it's a bank account, credit card or investment account that's nickel-and-diming you, shop around.
Give special consideration to smaller banks, online banks and credit unions, which can offer some of the best rates and cheapest accounts around. Just remember that some smaller institutions may not offer all the services you want, such as online bill-paying, so make sure to get the full picture before you move your money.
Check bank-watchers such as BankRate.com, CreditCards.com, Credit.com and DepositAccounts.com to look for no-cost banks and lenders.
SecondAct Asks: Have you saved on bank fees? Tell us how in the comments section below.