Tuesday, January 25, 2011, AM | 2 Comments
In most banks, free checking seems to be a thing of the past. On top of that, if you use another bank’s ATM, you will be charged more than previously you could ever imagine. If customers put a stop on their check for some reason, they would see an increase in fees.
The fees may be increasing beyond the usual limit on checking accounts. You could consider this as a revenge of banks as the industry seeks ways to offset the effect of new regulations that limit key revenue sources.
The new regulations – Federal Reserve’s restrictions – have put a cap on the fees banks can charge the merchants whenever customers swipe their debit cards.
Some experts estimate these restrictions could slash banks’ income by as much as 70 percent, or about $14 billion a year, once it goes into effect this summer.
Banks are also prohibited from automatically enrolling customers in overdraft programs, which have been an increasingly rich source of penalty fee income.
To make up for the losses, banks have introduced all kinds of fees on your checking account which you can potentially avoid if you care to check your account before using your debit or ATM card. Here are some specific ways to minimize the sting of the increasing fee.
Don’t throw away notices from your bank
Last month, I noticed the bank had charged me $15 in maintenance fee when I went online and wanted to pay my bills. The bank said they had sent out letters to its customers stating it would charge the fee if the account went below $100. I had not seen the letter and told the teller so. She talked to the manager and luckily the bank reverted the amount to my account.
Don’t throw away the bank’s letter before reading it and read it thoroughly to understand what the letter is saying.
Service fee on bounced checks
In the past, if your check bounced, some banks would not charge any fee. Not any more. Most banks would charge fee. Of course, it doesn’t happen everyday. However, be aware of it to ensure you are not caught off guard.
Always use your bank’s ATM
The cost of using another bank’s ATM will be getting more expensive. You will be stung with extra fee from both sides, your own bank and the other bank that the ATM belongs too.
Check your account before using debit card
Check your account first and see if you have enough money to cover your charges using debit card. Ask your bank to turn off the ability to overdraft. In case you didn’t, keep in mind that fees are as high as $39 per violation. Always check your bank statement. If you are not careful to see that you have overdrawn your account, you can quickly rack up hundreds of dollars in fees without realizing it.
If not satisfied, take your money to another bank
Even though banks are pulling back, free checking is still available. 65 percent of checking accounts last year were free, according to Bankrate.com.
If you are 55 or over…
The bank teller looked at my gray hair and said “We will convert your checking account to 55-plus. That way cashier and certified checks from the bank will be free of any fee.”
To avoid certain other kinds of fees, experts suggest to consolidate CDs, checking and savings accounts at a single bank is worth considering.
Check out smaller community banks
Another option is to check out smaller community banks or credit unions, which may offer more favorable terms and a more intimate level of service.
The new law applies only to banks with assets of more than $10 billion, which exempts many small banks and credit unions that account for about 35% of debit card transactions.
It may be time to consider smaller banks and credit unions for opening account with them. You have to make sure that they have a convenient network of ATMs, or they reimburse out-of-network fees. This is all about comparison shopping.
In a Nutshell
If you have limited money, you might want to avoid the extra fees that big banks have started charging. Why give them the pleasure of collecting money and making huge profits from fees? You surely can do something about it.