When you open a new checking or savings account you sometimes encounter unexpected fees. Though most banks spell out all their fees in policy documents, consumers may overlook the details and are surprised when they open their first monthly statement.
You can reduce the shock factor by keeping an eye out for common expenses that involve insurance, overdraft protection, credit reports, bill payment, mobile banking, and more.
Common banking expenses to watch out for
Banking expenses can creep up on you if you aren’t attentive. Keep an eye out for the following:
• Unnecessary insurance. All those attractive offers that banks and credit card companies throw at you in ads typically come at a cost. Banks with their own credit cards often try to slip in warranty insurance coverage or similar type of protection for ostensibly “free” services. While you might be willing to pay for the service, it’s always smart to review the fees so you’ll know what you’re paying for.
• Overdraft protection. A 2013 report by the Center for Responsible Lending stated that the median overdraft fee is around $35. In 2011, that cost American consumers a total of nearly $17 billion. While paying for overdraft protection may have benefits, it’s best to ask your bank to decline transactions when you don’t have sufficient funds.
• Credit reports. Credit reports are valuable and important to have. They empower you to monitor your financial standing and spot mistakes before they become damaging. However, what’s not smart is to pay for credit reports. Federal law states that every American is entitled to one complimentary copy of his or her credit report every year. All you have to do is visit annualcreditreport.com. Despite the availability of free reports, some companies will try to sell you additional copies.
• Mobile banking fees. Banks that are looking to turn a profit on every last service will often try to implement mobile banking fees. Keep an eye out for these and never go with a bank that charges for its mobile app. Mobile banking should be complimentary.
Ways to circumvent banking fees
Whether the general public likes it or not, banking fees are on the rise. To protect your assets, take advantage of these easy methods of circumventing extraneous banking fees.
• Shop around. As is the case with anything you purchase as a consumer, you have the right to shop around for better options and prices. Each bank administers its own rates, fees, and services, so you should find one that works for you. According to Natalie Cooper, editor of BankingSense.com, “When banks create terms and conditions for checking and savings accounts, they do so in their own best interests. Consumers should do the same by reviewing these documents and either adhering to the terms or finding a more suitable bank or account, if necessary.”
• Avoid closing accounts early. Many banks charge you an account closure fee if they close an account within the first 180 days of opening it. This is to prevent people from signing up for promotional benefits and immediately closing after they’ve got the booty. This information can always be found in the fine print, so keep an eye out.
• Free checking is good checking. While the trend is toward increasing bank fees, many banks still offer free checking as a point of differentiation. Always read the fine print. Free checking accounts are excellent for customers hoping to avoid superfluous fees.
• Online banking. While mobile banking has become a standard feature for most brick-and-mortar banks, newer online-only banks are beginning to show up in the marketplace. While you won’t have the convenience of face-to-face interactions, there are generally fewer fees and better terms if you are willing to bank entirely online.
• Maintain a healthy balance. It’s pretty common for banks to impose minimum balance fees. These requirements may be set as low as $100 or well into the thousands. Before signing on the dotted line, review the minimum balance requirements and always stay well above that threshold thereafter. Fees can be as high as $25 or more.
Be a smart banker
When you decide to do business with a particular bank, it helps to understand what’s actually happening. You are essentially asking the bank to protect your money, while giving the employees the opportunity to lend it out to other people.
Should you really have to pay excessive fees and expenses for this service? Be a smart banker by finding a bank that keep fees to a minimum, and gives you valuable perks and benefits.
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