Watch out for Fees: Time to read the Fine Print

Tuesday, January 18th, 2011 by Charles Mayfield, CFP®


Whether you’re checking luggage or accumulating travel miles, chances are you have seen an increase to your fees in recent years.  As a financial planner, it’s old hat to educate clients on the fees associated with various credit cards.  For years, credit companies have lured in would-be cardholders with promises of points, cash back, and rewards; but at what cost?  As the financial overhaul comes into effect, there are additional proposals to cap merchant fees that are charged every time you use your card to purchase something.  These proposals represent a potential 80% drop from current levels.  80%!

As regulators continue to close in on some of the traditional revenue sources for banks, it is apparent that banks will look to make up some of that revenue by adding fees to common transactions or occurrences.  Those free debit cards might not be free anymore. The same may be said for “free checking accounts”.  Be on the lookout for more stringent spending limits and charges for non-usage of accounts and cards.  Any financial planner worth their salt will tell you to limit the number of cards you use annually.  This may come at a price in the future.  Those extra cards you simply leave in your desk drawer may cost you.

Here are just a few areas to keep an eye on as we welcome in this new era of banking:

Paper Statements:  There will be fees to get your statement in the mail.  We encourage our clients to turn off the paper statements they receive for investment accounts.  It looks like doing the same to your traditional checking and savings accounts may be prudent.

ATMs:  This one has two heads.  An inactive card will likely cost you in the future.  Some banks are already imposing inactivity fees for Debit Cards to the tune of $8.95 per month.  Additionally, you will likely see a new or increased fee to get cash from an ATM that isn’t associated with your bank.

Account Activity:  Use your account…or be charged.  In the case of most traditional checking accounts, this isn’t a typical concern; if you have extra accounts, you may need to consolidate.  But with a savings account, you could also incur a charge if you make too many withdrawals or transfers per period. Look for new guidelines on what constitutes allowable ‘usage’.

Account Minimums:  Carrying a minimum balance on certain accounts has always been the norm. In the past, higher balances were rewarded with higher interest rates to your balance.  But now you may be required to keep a minimum balance in your checking account in order to avoid a monthly maintenance fee.  Keep an eye out for additional fees going forward.

Direct Deposit:  Many banks already have fees for checking accounts that don’t have direct deposit.  However, the rules typically apply to aggregate deposits over the course of a month.  Aggregate limits will most certainly rise or a requirement for a larger single sum to hit the account at least monthly.

Giveaways & Sales Gimmicks:  If you have been to an airport, college campus, sporting event or shopping mall in the past 5 years, you know what I’m talking about.  Those “get a free T-shirt or pocket calculator to get this free debit or credit card” kiosks are a nightmare.  Don’t be fooled (not that you ever were).  Another gimmick is to give you a discount off your purchase if you apply for a store card at the time of purchase.  It is worth a conversation with your children.  Especially if they have, or will be, headed away to school.  There is NO such thing as free and the price young consumers may ultimately pay to these predatory vultures could be very costly.

Most banks are standing firm by these new fees saying that many of them can be avoided by simply complying with the rules of the account.  Be sure you educate yourself on how your bank enforces its rules so you can save in the long run.  They will squeeze as much out of you as you allow.

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