In 2013, banks charged over $30 billion dollars in overdraft
fees and were caught posting the highest charges first, to expedite the
overdraft situation.[1]
While overdraft fees can be controlled by closely monitoring the balance in
your bank, what about other fees? Every January and July you should go through
your financial statements and see if you’re being charged any fees you might
not know about. Eliminating fees and maximizing rewards, where you can, should
be a semi-annual task for your finances. Here are some common fees to look for.
- Overdraft fees – Overdraft fees are the worst. You inherently don’t have money and then you have to pay even more money if you were to find yourself in that situation. The fees can be over $30 regardless of the amount overdrawn. Imagine if it were an interest rate. You could have to pay $30 for a $3 charge leaving you with an instant 1000% interest rate. The best way to avoid these fees is to monitor your bank account daily or weekly. You don’t have to balance to the penny, but checking your online account daily can be very helpful to make sure you don’t overdraw your account.
- Minimum balance fees – Ever since the financial crisis of 2008, these fees have become rare. But a lot of times people won’t read the fee breakdown or the bank simply won’t make it easy to find the fees. Reviewing your statements monthly can help you identify the fees. If your bank is currently charging you those minimum balance fees, then change banks immediately. Most banks no longer charge those types of fees, so finding a new one shouldn’t be a problem.
- ATM fees –USAA doesn’t charge a bank fee for using other ATMs and will refund you up to $15 a month in ATM fees (USAA serves military members and their dependents). A lot of people may be getting double charged and may not know it. If you use a non-bank ATM, the ATM may be charging you a fee and then your bank may be charging you a fee also. Some people can be losing $4-$7 each time they take out $20. This will quietly, yet quickly, drain your account and you may find yourself with overdraft or minimum balance fees because you weren’t tracking the ATM fees. To avoid these fees, find banks that don’t charge these fees or try to utilize your bank as much as possible to avoid the fees.
- Statement fees – In an effort to do the right thing and “go green” many banks will charge upwards of $3 to send out paper statements. It’s marketed as a positive initiative, but I assure you, it is a money-making scheme. You may have to go paperless with your bank to avoid these fees.
- Annual fees – These are common with credit card companies. Some credit cards offer fantastic rewards while charging an annual fee. You’ll have to do the math to determine if you’re making a profit with the rewards after the annual fee. If not, then switch credit cards to avoid those annual fees. That being said, I pay more in annual fees because I have the Air Force Club card which donates money to the Morale, Welfare and Recreation Fund. Also, when I first joined the Air Force, it was considered a professional courtesy for NCOs and Officers to be club members. But generally speaking, you should try and find a credit card without an annual fee.
There are many types of fees you should avoid. A quick search
through your financial statements can help you identify these fees and then
eliminate them. I helped one Airman (E2) recapture $25 a month by reducing all
the fees. This was several years before the 2008 financial crisis, so hopefully
everyone saw a decrease in the fees they were paying.
[1] http://www.forbes.com/sites/greatspeculations/2014/05/29/banks-hike-overdraft-fees-after-regulatory-clampdown-hits-revenues/
