bank fees

7 Money Leaks You Need to Plug

Mikey Rox — Thu, 15 Sep 2016 10:30:05 +0000

Want to tighten your budget, but can't figure out where you can save money? Look for leaks in your budget — places where money is slowly but surely leaking out. Here are seven places to start:

1. Insurance on Old Vehicles

Have cars or trucks sitting in your garage, driveway, or backyard that rarely or never get road time? Or maybe you're paying insurance on other types of vehicles — like boats or motorcycles — that have become permanent fixtures on your landscape. If this situation sounds familiar and you're still carrying insurance on these vehicles, it's time to make a decision. Either cut the insurance and put a tarp over the machine(s) for preservation, or put it up for sale so you can make a few bucks.

2. Bank Fees and Out-of-Network ATMs

Many checking and savings accounts have maintenance fees related to a minimum balance, and if you don't keep that minimum in the account, you'll be charged the fee — and you may not even realize it. For instance, last year I upgraded my savings account to a higher-yield savings account that pays more interest, but I recently took out a large sum of that savings for a down payment on a home. Unbeknown to me, the new savings account charges a $12 monthly fee for not keeping a minimum balance of $10,000, which I was quick to flag, and I reverted back to my previous account until I've replenished my savings to accommodate the higher-year account's requirements. Now, $12 a month may not seem like a big deal, but if you let it go too long, it really adds up. It's worth calling your bank or sitting down with an in-bank representative to discuss your accounts' requirements and to ask about what types of accounts best suit your needs.

Another way you can plug money leaks from your account is to avoid ATMs that charge a fee for use. I've seen service fees upward of $10 at some ATMs, and that's not counting the fee that your bank may also charge — my institution's is $2.50 per transaction — every time you use an out-of-network ATM. If you need quick cash (like for a night out, for example), try to remember to go to your home back earlier in the day or stop by a convenience store, like Rite-Aid or 7-11, and use the cash back option if you're on the go.

3. Unused Memberships and Subscriptions

Over the past several years, the availability of membership and subscription services has skyrocketed thanks to our increasing attachment to mobile devices. Services like Spotify, Netflix, Hulu, and more extract their monthly fees from our bank accounts, and that can be dangerous if the price is not justified by the amount we use a particular service. If you lost your interest in an existing subscription, cancel it. This also applies to traditional month-to-month memberships too, like your gym. If you're not using them on a consistent basis, put them on hold until you get back on track or end them so you're not paying for rather pricey services you're not receiving.

4. Credit Card Interest and Late Payments

Avoiding credit card interest and late payments should be a top priority when you're trying to stop hemorrhaging cash. Maybe you can make up the difference by plugging up the other money leaks listed in this article. But, if that's not feasible or if you fall short, consider picking up a side gig, like pet sitting using services like Rover.com and Dog Vacay or driving with Uber or Lyft. I personally do both, and the money I've made from these "extracurriculars" has helped me pay off bills and put a substantial amount of money in my savings account.

5. Mobile Data Overages and Outdated Plans

Many of my friends complain about never having enough data and subsequently having to pay for overages. It's annoying for them because either they have to suck up the cost of going over, or cut back on their data usage, which becomes quite prohibitive after a while. In addition, if you've had the same mobile plan for a while, now is a good time to call your provider to see what savings are available. Last year, I called my mobile provider to inquire about my plan, which had remained the same for about 10 years, and I was happy to come off the call with about $8 in savings per month moving forward.

6. Wasted and Spoiled Groceries

I know far too many people who have pantries packed to the brim with boxed and canned goods that are many years old — and many years past their expiration dates — who continue to purchase even more boxed and canned goods every time they visit the supermarket. It's pure nonsense.

First step, clean out your pantry! Throw out what's expired and the things you know you're not going to eat (or deliver the still-edible goods to a local food pantry), then bring whatever's left to the front of the pantry to be consumed immediately. Next, stop buying items for which you don't have specific plans; this also includes perishable foods. If you not sure when you're going to eat something, why are you buying it? Just in case? Just in case is how you spend way more than you need to at the supermarket. Make a list, check it twice, and stick to it when you next go grocery shopping.

7. Vampire Energy Consumption

Is your air conditioner constantly running — even when you're not home? Do you treat the heat the same way in the winter? TV left on? Dryer turned to high? Faucets dripping? Everything plugged into outlets even when they're not in use?

Every time you quietly answered yes to those questions, it costs you money. To curb your energy consumption, make sure everything is off when you leave the house. Also, unplug non-daily-use electronics and appliances — like that nightstand lamp that you never use — so they're not eating up electricity for no reason. And for goodness sake, fix water and air leaks around the house so you're not almost literally throwing money out the window or down the drain. Be mindful of other ways you may be consuming more energy than you need to, like turning off porch lights, adjusting the temperature in your fridge and freezer, cleaning air filters, and using more efficient cycles on the dishwasher and washing machine if a lower setting will get the job done.

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

11 Ways to Avoid Bank Fees While Traveling

Nick Wharton — Fri, 08 Jul 2016 09:00:12 +0000

The worst thing to get charged for when you're on vacation is a fee for using your own money. Even worse, there are fees you may not even know existed until you return home and check your statement. They're not all small fees, either. Some of them can be as much as $7 per transaction.

Imagine if over the course if your trip you visited the wrong ATM 10 times and ended up with $70 worth of fees. Fear not, though. I'll go over the most common fees you may run into on the road and show you how to avoid them.

ATM Fees

ATMs are probably going to be your biggest enemy when it comes to overseas bank fees. Most American banks will charge you between $5–$7 per overseas ATM withdrawal. If you travel a lot or take out money frequently while on the road, these can quickly add up.

The best way to save money on bank fees is to do a little bit of preplanning before your trip. You have a couple of options that can help you eliminate ATM fees.

1. Capital One 360

Capital One 360 Checking account holders can use any ATM without incurring usage or foreign transaction fees. This is an online only account (which is why it has no fees), but it even earns interest. Those are two big bonuses for anyone who travels internationally frequently.

2. Charles Schwab

Charles Schwab accounts have no fees and they reimburse all your ATM fees at the end of each month.

You have to open a high-yield checking account in order to qualify, but their debit card can be used in any ATM around the world and you'll never pay a cent in bank fees. There is no minimum deposit required and no monthly service fee either.

3. TD Bank

With the TD account, you are charged a flat $2.50 fee for ATM withdrawals and no foreign transaction fees.

4. Global ATM Alliance

A group of international banks have come together to form the Global ATM Alliance. Basically, any customer who holds an account with a participating bank can take out money from any associated ATMs without a fee. Note that while you won't be charged for using a member bank ATM, you may still get charged foreign transaction fees based on the amount you withdraw. Make sure you check with your bank precisely what their fees are.

The Global ATM Alliance includes the following banks:

Bank of America (United States)
Barclays (England, Wales, Spain, Portugal, Gibraltar, and certain countries in Africa)
BNP Paribas (France, Ukraine)
China Construction Bank (China; Bank of America card holders only)
Deutsche Bank (Germany, Poland, Czech Republic, Spain, Portugal, and Italy)
Banca Nazionale del Lavoro (Italy)
Santander Serfin (Mexico; Bank of America card holders only)
Scotiabank (Canada, Caribbean, Peru, Chile, and Mexico)
Westpac (Australia, New Zealand, Fiji, Vanuatu, Cook Islands, Samoa, Tonga, Papua New Guinea, and Solomon Islands)
ABSA (South Africa)
UkrSibbank (Ukraine)

5. Avoid Credit Card Fees

Many credit cards charge a 3%–5% fee on any purchase made overseas. Think about that for a second. If you go on a two-week family vacation and spend $6,000 out of country, you would end up paying $180 in fees. Luckily, not all credit cards charge this fee, so choosing the right credit card for travel can save you a lot of money on the road. (See also: Best Travel Rewards Credit Cards)

A Few Extra Tips

Take a few other extra steps to make sure you aren't spend a few more extra dollars every time you reach for more cash.

6. Don't Use Random ATMs

While it may be convenient to use the ATM at your hotel or at the corner store, these are typically the ones that will cost you the most in fees.

7. Don't Exchange Money on the Street

Sometimes it's tempting to exchange money with the random guy outside the bank or the people standing around at border crossings. Don't! You may think that they have better rates than the bank, but they're usually scammers. Best case scenario, you get a bad exchange rate, worst case ... you get completely ripped off.

8. Avoid Currency Exchange Booths

While not quite as bad as the hustlers on the street corner, currency exchange booths are the next worst thing and typically have horrible exchange rates, especially ones located in airports.

9. Exchange With Other Travelers

If you end up with a bunch of extra local currency at the end of your trip, consider selling it to another traveler for USD. You'll probably get a better rate and you can avoid all bank and conversion fees this way.

10. Always Pick the Local Currency

Oftentimes when you use your credit card abroad, the machine will give you an option to use your home currency. Don't do this. They will usually charge you a worse conversion rate than your credit card if you just use local currency.

11. Download the XE App

It's always best to know the exchange rate for the country you're traveling to. The XE Currency App is a handy little app will automatically update every day with the exact exchange rate.

How do you access cash when you travel — and avoid bank fees?

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This article is from Nick Wharton of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

16 Everyday Things You Shouldn't Be Paying For

Mikey Rox — Mon, 11 Jan 2016 16:00:03 +0000

Life costs money — a lot of money. But as savvy personal-finance gurus, we've learned how to cut back where we can. Consider this list of everyday things you shouldn't be paying for, and then let me know some of the basic freebies you live by in the comments below. Happy saving!

1. Wi-Fi Outside Your Home

Unless one of your neighbors is technologically inept and has left their Wi-Fi network unlocked, you probably have to pay for your own Internet connection at home. Okay — par for the course. But if you're paying for Wi-Fi outside of your home, you're giving into a system that takes advantage of impulse buyers.

Plenty of places offer free Wi-Fi these days (Starbucks, Panera Bread, and even many McDonald's) as an incentive to come in and sit for a while. But then there are times when you really want to connect, and the only option is a paid connection (airplanes, anyone?). Don't fall for it. Load your devices up with everything you need to relax or read beforehand (like books, documents, movies, and TV shows), so you don't have to pay to get online. One day, in a perfect America, we'll never have to pay for public Wi-Fi. Consider your refusal to do so today a stand for the future.

2. Condiments

How much ketchup, mustard, and mayo do you use? I use very little, so the packets that I can harvest from my occasional take-outs and order-ins suit me just fine for when I need them at home. Even more expensive commodities like sugar, jams, and honey can be found if you're looking hard enough — like those packets and individual jars that are common at the resorts and hotels that you may visit on vacation.

3. Napkins

Free napkins are virtually everywhere you go, from rest stops to fast-food joints to the bars at your local restaurants. They're at your place of employment, the doctor's office, and even at your local theater. Pick up a few every time you go out and you'll never need to buy another napkin again.

4. Water

One of the most brilliant capitalism coups of the 20th century was convincing people to pay for water in bottles. Um, hello — we live in America, where we have some of the cleanest, tastiest water on the planet (which our taxes cover, by the way). Fill up a reusable bottle already. It's 2016, my friend.

5. Bank Fees

One, you shouldn't have a checking account that's charging you a monthly maintenance fee. If you're banking at an institution that's siphoning money from your account just for being part of its brand, change banks — stat! Also, stop visiting ATMs that charge fees. I've gone to ATMs whose fees were upwards of $5 before, and that's just not acceptable. If you know you'll need cash on a night out, take out how much you think you'll need. You're already paying inflated prices for drinks — do you really need to pay $5–$10 extra in bank fees when all is said and done?

6. Fitness

Nobody — and I do mean nobody — needs to pay for a gym membership. Exercise is free if you want it to be. There are plenty of workout and fitness videos available for free on YouTube and other resources to help folks who are pinching their pennies lose weight and get in shape.

7. Your Mobile Phone

Mobile phone companies are fighting so hard for your business these days that they're offering free phones to switch carriers, sign new two-year contracts early, and other incentives. Listen to me: You do not need to the latest and greatest phone as soon as it hits the market. Cool your jets, wait a bit, and upgrade when it's available to your for free as a result of your continued business with your carrier — or one to which you switch. They need you, not the other way around.

8. Books

Hello! Paperback or hardcover, your local library has a wealth of books for rent and for free. Oh, and did we forget about borrowing from friends? That's still totally legit, ya know. (See also: 17 Cool Jobs for Book Lovers)

9. Credit Reports

Every one of us is entitled to a free annual credit report by decree of the federal government. Never, ever pay for one. The credit report you get in January should be accepted by anyone who needs to see it until at least a year later.

10. Run-of-the-Mill Computer Programs

Google Drive, with all its components, pretty much replaces any need for the Microsoft suite of office software. If you can't afford Microsoft or other programs — and they're fairly pricey if you have to buy them yourself — there's no need to fret. Online resources have your back.

11. Ice

It's frozen water, ma'am and sir. Even though we weren't born magicians, we're all capable of turning water into ice, at home, for free. Stop buying it!

12. News

It's everywhere, and, frankly, print media can't keep up with the immediateness of the Internet and social media. If you're connected, there's no point in buying anything in print anymore.

13. Tax Prep

Unless your taxes are complicated — like, say, if you own a business, and you require an accountant — there are resources online that allow you to do your taxes efficiently and effectively, which, in turn, results in a quicker payday than if someone else were on the case for you.

14. Cable TV

Nearly every show you watch is available either for free online by its respective network or a streaming service that charges far less than the monthly cable bill you're paying.

15. Long-Distance Phone Calls

One word: Skype. Or, okay, two words: FaceTime. Either way, long-distance phone calls should be dead to you by now.

16. Museum Tickets

Almost every museum offers at least one day a month where admission is free. Even better, some museums are part of programs — like Bank of America's Museums on Us — where entire weekends are free. Before you fork over the cash to view and enjoy what, frankly, should belong to the American people and not private entities (especially those getting tax breaks for being "not-for-profit" organizations — but I digress), research the museum you'd like to visit and see how you can get in without paying a dime.

What are some other everyday things you shouldn't be paying for? Let me know in the comments below.

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Ways to Pick the Bank That's Right for You

Mikey Rox — Thu, 11 Dec 2014 14:00:11 +0000

With so many options, picking the right bank isn't always easy, leaving some people to pick a bank at random without giving much consideration to whether the institution meets their banking needs. (Personally, I chose Bank of America because of its abundance of locations across the country; I was tired of paying all those ATM fees from other banks while I was traveling). But while this a quick way to pick a bank, it doesn't guarantee the best banking experience. (See also: 9 Good Reasons to Choose a Credit Union Instead of a Bank)

1. How Do You Prefer to Bank?

Some people prefer going to an actual branch and speaking with a banker face-to-face, so they need a brick-and-mortar location. And if you travel a lot for either work or pleasure, you might need a big bank with locations in most of the country. When I first moved to New York City, I had to switch banks specifically for this reason. The bank I was with had very few branches in Manhattan, and I would have to take a 15-minute subway ride to deposit a $25 check.

On the other hand, if you're primarily banking within your community, and you prefer personable service and a hometown feel, a regional or community bank might provide a better banking experience.

Then again, maybe you can't remember the last time you stepped foot in a bank branch. Or perhaps you conduct most of your bank transactions electronically — thank goodness for mobile deposit, amiright? — so an online checking or savings might be right up your alley.

2. Check for FDIC Backing

Even a big bank can shut its doors. Remember 2008? No matter the type of bank you choose, you need to be confident that your money is safe. Therefore, only bank with institutions that are insured by the FDIC. Your funds are protected up to $250,000 per account, so you know your cash is safe if the bank goes under.

3. What Are the Hours and Locations?

Choose a bank with locations and hours that work with your banking schedule and location, since you probably don't have time to drive 10 or 15 minutes out the way to find a branch. Also, factor in a bank's lobby and drive-up teller hours. When are you most likely to visit branches? If you prefer visiting a branch before or after work, a bank that opens before 9 a.m. and remains open until 6 p.m. might be a better fit. Or if you conduct most of your transactions on the weekends, a bank that offers Saturday or Sunday hours may be a better option.

4. What Are the Fees and Interest Rates?

If you're switching banks because you're fed up with high fees and low rates, you need to be more selective this time around. Besides, if you're looking to grow your money and reach a financial goal, the last thing you need are fees eating away at your balance. Speak with a banker or visit the bank's website for information on fees and rates.

Is there a monthly maintenance fee for checking and savings account? If so, is there a way to avoid this maintenance fee? Does the bank offer free overdraft protection? What's the returned check fee? What type of rates can you anticipate for a checking or savings?

5. Does the Bank Offer a Variety of Investment Options?

Regular savings accounts don't earn much interest, but with a certificate of deposit, a money market account, or interest checking, you'll usually get more bang for your buck. Does the bank offer these products?

Some small banks only have one type of checking or regular savings, whereas other banks offer a variety of accounts to accommodate different customer needs. Some banks offer accounts specifically for students or senior citizens. You should thus consider your banking needs and determine whether your chosen bank offers adequate options. The goal is finding a bank with accounts that match your savings or checking needs.

6. Do You Need Other Financial Products?

You may prefer using your bank for all your financial needs. So, when choosing a bank, make sure you inquire about other products. If you're planning on getting a mortgage or auto loan in the near future, you might choose a bank that offers these products as well. As an existing account holder, you might be eligible for better rates on loans and credit cards.

7. What Services Are Important to You?

Make a list of must-have banking services. Big banks offer a massive selection of services, such as online banking, bill pay, wire transfers, and direct deposit. These institutions usually have the resources to provide the most innovative products. But if you're working with a community or a regional bank, services might be limited. Visit the bank's website to make sure the institution offers the services you use.

How did you choose your bank? Did any other these suggestions factor in? Let me know in the comments below.

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Would You Dance to Avoid a Fee?

Meg Favreau — Mon, 29 Jul 2013 09:48:32 +0000

That's the question Fidelity asked...sort of. More specifically, they asked ATM users — while they were at the ATM — if they'd rather pay a fee or dance to get their cash. The video below shows those who danced. I don't know if these are real ATM users or if the video was casted (I always assume these things are casted, but hey, I can be kind of a cynic). Either way, it's fun to watch people bust out some sweet dance moves on the street — and it's always good to avoid an ATM fee.

Video Link: Would You Dance Instead of Paying ATM Fees?

So...would you dance to avoid paying ATM fees?

This article is from Meg Favreau of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Charged With an Overdraft Fee? Get Your Money Back!

Darren Wu — Wed, 19 Jun 2013 10:36:33 +0000

Picture this: You login to your checking account to review your transactions — and BAM!

You've been hit with a $35 overdraft fee. Your account has a negative balance, and it's showing in bold red font. (See also: Banks Can Manipulate Your Transactions, Then Charge You 1750% Overdraft Fee)

What do you do now?

Two things: Get your money back, and make sure it never happens again.

I'll show you how to do both. Let's start with getting your money back.

Getting Your Overdraft Fee Refunded

Banks spend lots of money trying to earn your business. Your deposits are used to lend money to other customers, in products such as a mortgages or business loans. They profit by charging interest and end up pocketing millions of dollars.

So once they get you as a customer, the last thing they want to do is lose your business. You mean a lot to them.

Knowing this, you're now in a position of power — negotiating power.

To get your overdraft fee refunded, just call customer service and ask for the fee to be removed. Be polite, but firm.

Tell the representative what you want, and why it's in their best interest to give you what you want.

Don't get angry, but be persistent. If you've been a responsible customer, you'll get the waiver sooner or later.

If you need more guidance, follow this simple script on negotiating out of bank fees. Trust me; it works. I know, because I've used it myself!

It'll be the quickest, easiest $35 you'll ever save.

Yet you should only need to do this once. Because after you get your money back, you'll move on to the next step.

Make Sure It Never Happens Again

Once you get your money refunded, you should set up your finances so that overdraft fees will be a thing of the past for you. Here's how.

Put Your Bills on Your Card

First, charge everything you can to your credit card. This includes routine expenses such as your cable, internet, and cell phone bills, plus other stuff such as eating out, groceries, and gas purchases.

By putting these charges on your card, overdraft fees will no longer be an issue.

Why?

Because you can set up automatic payments to be sent from your checking account to your credit card before your bill's due date, so that you don't get hit with a late fee. Better yet, since you're charging purchases to the card that you'd normally make anyway, you'll get more bonus points or cash back.

But what about other bills that can't be charged to your credit card? Some expenses must be paid directly from your checking account. These can include your monthly electricity and gas bills, your rent or mortgage, and other expenses such as DMV fees.

Plan and Manage Your Expenses

Here's how to manage both your credit card and non-credit expenses.

Since many of us get paid twice a month, the first thing to do is to wait for your second payday of the month.

Let's say you get paid at the end of May. Your credit card bill will likely be due in the beginning of June, for purchases you made in the April and May timeframe.

Knowing this, just perform this simple calculation — since your paycheck goes into your checking account, enter your checking account balance first. Then subtract your upcoming credit card balance that you'll be fully paying off. After that, subtract the upcoming expenses that can't be charged on your card.

Lastly — and most importantly — leave $200 as a buffer in case unexpected expenses pop up before your next pay period. Then you're free to do whatever you want with the money that remains — save it, invest it, or splurge with it (okay, don't splurge with it).

That's it. Once you set up this process, maintaining it will be easy, like second nature, and you'll never have to worry about getting hit with an overdraft fee again.

Have you ever been socked with an overdraft fee? Did you fight it and win? Tell us about it in comments!

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This article is from Darren Wu of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Power of the Customer in Banking

Emily Guy Birken — Tue, 04 Dec 2012 10:36:49 +0000

We tend to think of banks as enormous monolithic institutions against which customers may bang their heads in frustration — but forget about enacting any real change. And anyone who has ever spent an interminable amount of time waiting on hold for a customer service representative who will fail to explain the surprise fee on your account and refuse to waive it could be forgiven for thinking the little guy will never make a difference.

However, that familiar narrative of uncaring banking Goliath vs. powerless customer David got a pleasant shock in November 2011. That was when Bank of America backed down from their proposed $5 monthly fee for debit card usage. Their reason for canceling the proposed fee? Incredible customer backlash that included everything from a 300,000-signature petition to tens of thousands of Bank of America customers threatening to leave the bank. (See also: Why I Like Big Banks)

Apparently, the little guy has more power than we thought.

Banking is just like any other retail business — they need to keep their customers happy. In banking, the CEOs may be accountable to their shareholders, but they depend upon their customers to stay in business.

This means that customers have power in the face of unanticipated changes in the banking industry. Here is what you need to know about how banks make their unpopular decisions, and what we, as customers, can do about it.

The Straight Economic Model

For the most part, banks are pretty unsubtle and straightforward institutions. If they see that they will be losing revenue in one area, they will try to make up for it elsewhere.

This is what happened with Bank of America in 2011: The Durbin Amendment to the Dodd-Frank Act was placing limits on the amount that banks could charge retailers each time a debit, credit, or gift card is used. That fee — familiarly known as the swipe fee — had previously been unregulated, but the Durbin Amendment placed caps on the amount that retailers will have to pay for each swipe.

While these swipe fees are nominally instituted to pay for fraud protection and transactional costs, they have been an enormous income generator for banks. Bank of America in particular was bringing in $3 billion per year in profit from swipe fees. When the Durbin Amendment went into effect, the bank’s top brass wanted to find a way to make up for their lost income — hence the proposed $5 per month debit card usage fee. It was simply a straight economic decision — replace lost income with a small fee, spread out over every cardholder.

Of course, we all know what happened next. The idea of consumers suddenly having to pay a fee to use their card was infuriating — to the point where consumers decided to switch banks, publicly decry Bank of America, and basically make it clear that the company would lose more money by implementing this fee than they would lose by dropping it.

What happened was a failure on the part of Bank of America to understand behavioral economics — where money and emotion intersect. By looking at everything as a straight financial decision, they shot themselves in the foot. Dr. Dennis Jacobe, the Chief Economist for Gallup, put it this way — “unfortunately, this finance-focused approach to replacing the bank's lost revenue ignored some of the basic tenets of behavioral economics. From a behavioral economics perspective, one of the worst things a company can do is to begin charging a new fee for a service that had previously been free.”

The Price-Leader Strategy

The other big mistake Bank of America made was in employing the price-leader strategy when introducing this fee. This is a tactic wherein one major player in an industry changes a price or announces a new fee, and the rest of the industry simply follows suit.

This tactic can work very well. For instance, the airline industry often uses it. One airline will announce that it will be charging for checked bags, and suddenly every airline is charging for them. Customers grumble and pay the new fees, because it’s almost impossible to switch to a different airline and avoid them.

However, in the case of Bank of America’s monthly fee, other banks were not necessarily willing to jump on that train. Part of the reason for this had to do with the atmosphere of distrust toward banks in fall of 2011 — this was, after all, just about the same time the Occupy Wall Street movement started gaining traction.

As a result, Bank of America found themselves in the position of pricing themselves out of competition, and they quickly had to back down.

The Power of the Customer

When it comes down to it, customers ultimately have the power to decide if they will play by the rules the banks are setting. The Bank of America fee debacle was hardly the first time that customers just said no to a proposed fee change. In the mid-90s, banks tried to charge customers for teller transactions, hoping to entice them to use ATMs and the new-at-the-time online banking opportunities, thereby reducing overhead costs. Customers were horrified at the proposed fees and made it clear they would not stand for it. The banks that prospered were the ones that repackaged their products and found ways to offer discounts for not using tellers, rather than fees for using them.

In that case, as in the situation with Bank of America, customers voted with their feet. Their disgust at the proposed changes made it worthwhile to change banks. Making unpopular fee decisions literally cost the banks money in lost customers.

However, it’s not enough for banks to keep their customers through apathy or lack of other choices. Banks have also found that keeping customers happy and engaged is an important part of growth. According to Dr. Jacobe, “Customers become engaged only when four emotional needs are met: they feel pride and passion for the brand they bank with, they believe the bank has integrity, and they're confident they'll always be treated well and fairly. It's financially imperative that banks provoke this response. Fully engaged retail banking customers are much more likely to say they intend to open a new account or take out a new loan.”

And since customer satisfaction is so important to the growth of banks, judicious use of complaints is one of the biggest weapons in the customer’s arsenal. Making it clear to your bank that you are unhappy with their service can potentially bring about change — or at the very least, prepare your bank for your imminent departure.

The Bottom Line

It may feel as though the big banks hold all the cards, but we all need to remember that they really do need us more than we need them — as it is theoretically possible to keep your life savings in your mattress, while they simply cannot operate without customers.

Banks may have always followed the straight finance approach to keeping their revenues high, but they are beholden to their customers. When that straightforward approach ticks off their customers, they will need to find new methods, or else risk losing their most important asset — us.

This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

12 Annoying Bank Fees and How to Avoid Them

Miranda Marquit — Fri, 16 Nov 2012 10:36:51 +0000

In recent years, we’ve seen a lot about the rising costs associated with banking. Looking for ways to increase profits, banks are turning to fees at an increasing rate. Indeed, fees represent one of the major sources of revenue for many banks, and a recent survey from MoneyRates.com points out that fees are in fact on the rise.

Some fees, such as overdraft fees, are obvious, while others might be a bit sneaky. In any case, it’s important to pay attention to the terms and conditions of your account, and check your statements and communications from your bank for information about fees.

If you have any questions about fees related to your account, speak with a teller or other bank representative. In the meantime, though, keep an eye out for these 12 annoying bank fees, and do your best to avoid them. (See also: Avoid Bank Fees)

1. Overdraft Fee

This fee is charged when the bank clears a transaction even if there isn’t enough money in your account. According to Consumer Reports, the average bank overdraft fee is approaching $35.

You can decline overdraft services and avoid the steep fee, but that means your debit card transaction will be denied. Another option is to link your checking account to a savings account or a line of credit. Money is automatically transferred into your checking account to cover the overdraft. There is often a fee for this transaction, too (usually $5 plus interest charges on a line of credit), but it’s much smaller than paying an overdraft fee.

Of course, the best defense is to track your spending and make sure you have enough money in your account.

2. Nonsufficient Funds Fee

When you have a “bounced” check, this can result in a nonsufficient funds fee. Before the check clears, you have enough money in your account for other transactions to go through. However, once your check clears, all of a sudden that money is gone. Not only does your check bounce, being sent back to you without being paid, but you have to pay a nonsufficient funds fee of as much as $35 or more.

In many cases, it depends on the order your transactions are processed. Some banks don’t process all your transactions until the end of the day, and they might order them by type, chunking checks together, and chunking debit transactions together. If you have $100, write a check for $60, and have three debit transactions for $30 apiece, the order matters. If the bank settles debit card transactions first (total of $90), you will have one fee when the check clears. However, if the bank starts with the check, you will end up with three nonsufficient fund fees.

Once again, your best defense is to carefully track your spending so that you avoid going beyond your available funds.

3. Service Fee

These are fees that are charged monthly or annually, and are charged simply because you have an account. These fees can be charged on checking accounts and on savings accounts. Consumer Reports says that the average fee is right around $10 a month.

Some banks make it less obvious by charging an annual fee instead of a monthly fee. Realize that the fee will be taken out of your account automatically, — and that it could potentially trigger an overdraft.

Avoid service fees by looking for banks that offer free checking or by finding out if you can have your service fees waived by meeting certain conditions, like maintaining a minimum balance, or engaging in a certain number of transactions.

4. Returned Deposit Fee

This is one of the most depressing fees charged by some banks. This is a fee that is charged when a check someone writes you bounces. When such a check is returned, the money you thought you had (and might have already spent) is taken back out of your account. And then you might be charged between $15 and $25 — or more — on top of it for someone else’s mistake.

If you want to avoid these fees, you will have to accept cash, money orders, or cashier’s checks. For long-distance business transactions, you can use a service like PayPal to ensure that the money is already there before you deposit it in your account.

5. Minimum Balance Fee

Some accounts require that you maintain a minimum balance. This is especially common for interest-bearing checking accounts, money market accounts, and some savings accounts. However, you can find a minimum balance requirement with any account.

When opening your account, ask the teller for the specifics on the minimum balance requirements. Find out how the fee is figured. There are three main possibilities:

Average monthly balance. Your average balance for the month is figured, and if the average is less than the minimum, you are charged a fee.
End of the month. In some cases, the bank just looks at your balance on the last day of the month, and if you have the minimum, you aren’t charged a fee.
Balance drops below the minimum. The most stringent policies will charge you a fee if your balance drops below the minimum at any time during the month, even if it is only for a day.

Avoid this fee by maintaining the minimum balance, or by switching to an account without minimum balance requirements.

6. Account Closing Fee

Believe it or not, some banks charge you a fee when you decide to close the account. This fee is often right around $25. Some banks charge a fee no matter how long you have had the account. Other banks won’t charge you the fee if you wait a certain period of time before closing the account, often 90 days.

Ask the bank teller how soon you can close the account without incurring a fee. Wait that period of time before you close the account. If the bank will charge a fee regardless, you just happen to be out of luck (and $25).

7. Inactivity Fee

Some consumers might try to avoid an account closing fee by just leaving the account open and not closing it. Unfortunately, this won’t work if the bank charges inactivity fees. If you don’t use your debit card or have a deposit made for a certain period of time, your account can be labeled inactive — and the fees can start coming out, usually to the tune of between $5 and $15 a month.

Find out whether or not the bank charges an inactivity fee, and then make sure you perform the minimum transaction requirements in order to avoid it.

8. Lost Debit Card Fee

If you lose your debit card, you may have to pay between $5 and $10 for its replacement. If you want that debit card rushed to you, it could cost an extra $20 to $25. Keep track of your debit card, and, if you lose it, use other means of payment while you wait for a new one.

9. Online Bill Pay

Using online bill pay can be a rather convenient way to take care of your bills. However, some banks view it as a way to make a little extra money off your desire to make things easy. Consumer Reports points out that it costs almost $7 per month, on average, for customers to use online bill pay. Some banks offer this service for free, so shop around.

10. Paper Statement Fee

This is a rather small fee, relatively speaking, but it can start to become annoying over time — getting a paper statement usually costs $1 or $2 a month. Look at your bank statement carefully for this fee. If you are being charged for your paper statements, switch to paperless. Your bank account — and the environment — will thank you.

11. Foreign Transaction Fee

Many banks tack a foreign transaction fee onto your purchases when you use a debit card or credit card issued by the bank. This fee is often 3% of the purchase price. Sometimes, this fee is charged even if you make a purchase online from someone in another country and a currency conversion has to take place.

Some banks, like Capital One and Chase, don’t charge these fees on several of their credit cards. Double check your options to see if you can avoid this fee.

12. ATM Fee

When you use an ATM, you might be charged a fee. Many banks won’t charge you a fee if you have an account with the bank, but it’s another story if you use a different bank’s ATM. In these cases, you might be charged twice. You’ll be charged by your own bank for going out of network, and you’ll be charged by the other bank for not being a customer.

According to Consumer Reports, the average ATM fee is approaching $3. So, if you withdraw $20 from another bank’s ATM, you could be charged $3 by your bank and $3 by the bank that owns the ATM. Your fee amounts to $6 — that’s nearly one-third of the amount you got in the first place!

You can avoid ATM fees in some cases by making sure that you have the cash you need before you travel. You can also get cash back when making debit purchases at a store to avoid fees. You can also look for a bank that will refund ATM fees.

By carefully shopping around, and even considering credit unions, it is often possible to reduce the fees that you owe — or avoid them altogether.

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This article is from Miranda Marquit of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Going Green: How to Live a (Nearly) Cash-Only Life

Kentin Waits — Tue, 10 Jan 2012 11:24:25 +0000

According to Time.com, the current average APR on credit card debt is 15.22%. For folks who aren’t disciplined about managing credit card debt or paying off their balances aggressively, the rate is a real eye-opener. All the cash-back rewards, airline miles, and perks in the world can’t justify the financial hit consumers take in long-term credit use and interest repayment.

With interest rates on the rise and credit card companies devising ever-craftier and creative ways to score a few bucks here and there, isn’t time to consider going cash-only? In 2010, I wrote an article on 6 Reasons Why Cash Is Still King. Now it’s time for a more pragmatic discussion on how to make a cash-only life work for you. Here’s how to give a big thumbs-down to the credit card companies and go (almost) cash-only. (See also: 5 Ways to Give Cash as a Gift)

1. Carry Cash

Surprise! The first step in going cash-only is to actually get your hands on some of the stuff. It’s still green(ish), and it still works like a charm. Take a look at your credit card statements for an average week and see where/how you’re spending your money. Take a similar amount out in cash at the beginning of each week, and dispense it to yourself on a daily basis. Consider experimenting with the amounts a little and see if you end up spending less when you’re spending paper vs. plastic.

2. Save Receipts

One of the convenient things about using credit is the electronic trail it leaves behind. You can easily track transactions and refresh your memory about expenditures you’ve forgotten. But cash is a different animal. Get used to saving your paper receipts. I dump all my cash receipts in file folders divided by month/year. A shoebox and a binder clip for each month works just as well. It’s not the sexiest way to stay on top of what you’re spending, but it works like a charm.

3. Hold With Credit, Pay With Cash

Going cash-only doesn’t have to mean you spurn all of life’s conveniences or that you can’t leverage the power of credit from time-to-time. Using your card to reserve a hotel room, rental car, or other service is quick and convenient. Just remember, when you arrive at the hotel or car rental agency, pay in cash — and get that receipt.

4. When You Do Use Credit, Make It Work Like Cash

We live in the modern world and there are times (unfortunately) when cash just won’t work. For online shopping or other cash-adverse transactions, think of your credit card as a friend who’s spotting you a few bucks for the very short-term. Pay him back quickly. Who says you need to wait until you get your monthly bill to make a credit card payment? There’s nothing credit card companies hate more than getting paid back in full each month. I say, embrace the hatred and wear it like a crown.

5. Don’t Trade Credit Card Interest for ATM Fees

Whether you’re paying interest on a credit card or getting pinged by debit card withdrawal fees, using plastic usually means more money out of your pocket. Don’t trade longer-term interest for shorter-term ATM fees. Withdraw cash at the beginning of each week from your bank or an affiliated ATM and let that amount of cash guide your purchasing decisions — without the need for frequent, spur-of-the-moment trips to the ATM.

6. Remember: Safety First

Cash gets attention. Sometimes that attention is good (ask for a modest discount when you pay for your next car repair using cash instead of credit — it works). But at other times, pulling out a wad of $20s isn’t the best idea. Use your cash wisely, be smart about how much you carry at any given time, and be discreet about who sees it. Organize the cash in your wallet from lowest to highest bill, and keep anything higher than a $50 tucked away in a separate compartment.

There’s no question that credit cards can be a great convenience. Anyone who tells you to give up credit completely and permanently is trying to sell an idea that has a very limited real-world application. The key is to use credit responsibly and reserve its use for those occasions when cash simply won’t work — or will work only through complex and onerous measures (with online purchases, for example). For 95% of the day-to-day stuff, try skipping the fees, late charges, and interest. Rediscover cash.

This article is from Kentin Waits of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Things to Consider Before Switching to an Online-Only Bank

Paul Michael — Wed, 13 Apr 2011 10:24:08 +0000

The rise of online-only banking has been meteoric over the past several years. These virtual financial institutions offer tantalizing customer-focused products, as well as the latest technology to make online-only banking a breeze. Are you considering making the switch to online-only? Before you dive in, make sure you're considering the following things about this increasingly popular way to manage your money. (See also: 5 Best Online Savings Accounts)

1. How important is in-person service to you?

Some people just cannot, and will not, take human contact out of the equation. It's not a case of technofear, but the comfort of knowing that if anything does go wrong, or you need help, you can drive to a physical location and sit down with a bank representative.

Talking over the phone (which can lead to frustration over endless phone menus and outsourced help) has given many people heartburn over making a call. And live chat can be even worse. What's more, if the bank website goes down, the app fails, or you don't have internet access, you can feel helpless without a direct way to access your money.

So, before making the switch to online-only bank, ask yourself: Am I going to need in-person help in the future? If the answer is yes, online-only banking may not be for you. (See also: 7 Ways to Pick the Bank That's Right for You)

2. Does the bank have an established record of good service?

This is your money. Are you ready to entrust it to a new online-only bank with a lot of slick graphics, ad campaigns, and amazing promises, but no proven track record of success? With new online-only banks popping up every day, you need to do your research.

It's on you to do the homework and get good feedback before turning all your money over to a new online-only bank. And remember, even banks with a long history of business can have their troubles, so check into names you know well. What's in the news? It never hurts to triple-check.

3. Is the online-only bank FDIC insured?

The Federal Deposit Insurance Corporation was created in 1933 to promote public confidence and stability in America's banking system. Of course, a lot has changed since then, but the FDIC insurance seal is still a vital part of your safety and security.

Should anything happen to the bank (remember 2008?) your money is protected, usually up to the amount of $250,000; any more than that and you'd have to purchase additional insurance. However, most of us fall into that $250,000 category. If the online-only bank you're considering does not carry FDIC insurance, you should probably look elsewhere. To check, enter the name of the bank on the FDIC's website and you'll get your answer instantly.

4. How easy is it to put money in and get money out?

The last few years have seen some great features and benefits in both the traditional banking industry and their online-only competitors. For example, most banks now offer some kind of mobile check deposit using your smartphone or computer. In the case of online-only banks, this will be the primary way you get money into your online-only account after the usual direct deposits and electronic fund transfers.

There are also payment apps like PayPal, Venmo, Google Wallet, and Cash App. How well does your online-only bank integrate these systems? And many of these online-only banks have deposit limits. If you anticipate wanting to put more than, say, $30,000 a month into your account, this may not be for you.

Then, there's getting money out. Even in this increasingly cashless society, we still need physical money now and then. When that situation arises, how easy is it to get money from an ATM? Is the online-only bank even part of an ATM network? What about getting foreign exchange currency? If you need quick and easy access to cash, make sure your online-only bank can handle the request.

5. Are you comfortable with a limited selection of services?

Online-only banks have less options than their traditional brick-and-mortar counterparts. While both usually offer checking and savings accounts, credit cards, and cash back rewards, the online-only bank you choose may not provide home equity loans, auto loans, and other services you have come to expect from a bank. There are, of course, always other options for those kinds of services, but if you like to keep all of your financial accounts in one place, an online bank may not be what you need.

6. Are the interest rates competitive?

Luckily, most online banks nail this one. Unless you try really hard, you won't find an online bank that has rates lower than a traditional bank. The reason is simple — their overhead is lower. They don't have physical locations to maintain, which includes costs for everything from heating and lighting to security and maintenance.

With significantly lower operating costs, online banks can tempt you away from regular banks with excellent interest rates on a variety of products. For example, right now it's relatively easy to find an online high-yield savings account with an interest rate of over 1.5 percent; that's 15 times higher than the 0.08 percent national average. (See also: Interest Rates Are Rising: Here's Where to Keep Your Cash)

7. What about banking fees and minimum deposits?

As mentioned above, the low overhead costs of online banks mean that they can reduce fees and increase interest rates on checking and savings accounts. But there are other fees to consider.

If the bank isn't part of an ATM network, you'll be paying higher fees to take out your cash. And while some online banks start with a minimum deposit of just $1, others can ask for thousands of dollars to take advantage of the advertised rates. Like anything else, shop around and find the best option for your situation. If you rarely use an ATM, and use a cash-back service at the grocery store, you may be better off paying higher ATM fees to get higher interest on your savings. (See also: Are You Paying These 6 Unfair Banking Fees?)

8. Read the fine print carefully

The financial industry loves fine print, and online banks are no exception. Before you sign your name on the dotted line, go over everything with someone who knows the system well. There may be outrageous fees hidden in the fine print, or you might find that your information may be sold to advertisers and other agencies. This is not just your money, but your Social Security number and your personal information. Be sure you trust the institution 100 percent before you hand over your money and your personal information.

This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Beating Bank Fee Increases

Little House — Mon, 17 Jan 2011 13:00:09 +0000

This past week I was helping a colleague sort through her financial statements and came across a notice from her Chase bank account. According to the notice, on February 8th her bank will be increasing her banking fees by a significant amount. Not only will her monthly fee increase from free to $6 since her account doesn't qualify for a fee waiver, but non-Chase bank ATM fees and overdraft charges will also increase by a few dollars each. This is just one bank out of many that intend to increase their fees this year.

However, there are alternatives to beat, eliminate, or reduce fee increases at large banks. One option is to meet their fee-waiver criteria. Often that includes having accounts that have monthly recurring direct deposits or keeping a minimum daily balance. Another more obvious option is to switch banks. As hesitant as I am about switching banks, it's a thought that has crossed my mind, especially considering there might be fee increases on my accounts in the near future. But one can't just up and switch banks without some research or due diligence.

The Importance of Convenience

For me, the biggest deciding factor on which bank to choose, or whether to switch at all, is convenience. Since I have various sources of income that often appear in the form of checks, I like knowing I have access to an actual bank branch or ATM. Since I also have an online money market account that's more difficult to access (no available ATM or bank), my local bank branch is where most of my monetary activity takes place.

Analyzing my banking habits a little more closely, I could probably do without an actual branch, but an ATM location is a necessity, especially now that many ATMs digitally scan check deposits and credit those amounts the same day. This narrows down my options a bit, or at least eliminates online-only options for my everyday checking needs.

Where to Research

Knowing my banking habits and what I would like or need in a bank, I came across a site that helped me narrow down my search, Find a Better Bank. Using Find a Better Bank, I was able to use my zip code as a starting point and search within a five-mile radius, though their options include up to 50 miles. Next I selected banking features that applied to my personal situation from "Don't Care" to "Nice to Have" to "Must Have." Some features included interest-bearing checking accounts, mobile banking, debit card rewards programs, online bill pay, and overdraft protection to name a few.

I also answered some questions that would help determine how many fees I accrue a year for a rough estimate of potential matching banks. For instance, one question asked how often I use another bank's ATM, or how often have I been overdrawn in a year. Knowing that fees are possibly increasing this year, I can use this as a guideline to sort out the banks that are already more expensive from the ones that are less fee-heavy. Find a Better Bank also claims they monitor the banks every 90 days for the most up-to-date information, helpful if fees do begin increasing this year.

Finally, based on my answers to these questions, Find a Better Bank displayed a list of possible results sorted by estimated annual fee. However, the results also allowed me to sort by distance and percentage of preferred features. The least expensive bank was missing a few preferred features, but none that were important in the grand scheme of things. Coincidentally, the bank I currently use was listed as the most expensive bank on the list.

Bank Comparison

Find a Better Bank results also allowed me to compare two to three banks at a time, allowing me to see the differences between basic account information, like the minimum to open an account, account fees, and services. I was surprised at the differences between the least expensive options and the most expensive options. Two particular banks seemed very appealing, and one of them has locations near me.

Since my bank hasn't raised my fees yet, I'm still a bit hesitant to switch banks. I also realized that Find a Better Bank compares particular checking and savings accounts for each bank, and I didn't see the one I currently use in the results. This may have explained why my bank came out as most expensive on the list, yet I don't pay many fees myself. However, knowing that I have options if my bank follows suit and increases fees this year gives me a peace of mind.

This article is from Little House of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

That Sneaky Bank Almost Got Me

Philip Brewer — Fri, 03 Dec 2010 13:00:06 +0000

It was as much luck as anything else, but I just managed to avoid $30 in bank charges. It's a good example of rule number one for avoiding bank fees: pay attention.

I'd actually gotten the document with the details I needed to know a month ago. I'd even looked at it. Unfortunately, I missed one little detail that was tucked away in a large-format, eight-page, full-color, glossy brochure filled almost completely with details I didn't need to know — all the fees for all the services my bank provides, along with all the kinds of accounts they offer and the rules for all those accounts.

In a little box on page three was a little change: The minimum balance for money market accounts was now going to be $2,500 instead of the $1,500 it used to be. Fall below the minimum balance for even one day, and you get hit with a $15 change for the month. We have two of those accounts.

As I say, having missed this change when I got the brochure, it was mainly luck that I noticed it this morning. I was logging into my bank's website to transfer some money and clicked a link for "changes taking effect today." Clicking that link downloaded a PDF of the same brochure I'd already looked at.

Since the transfers I was going to make this morning were to our money market accounts, I had money market accounts on my mind. So I took a minute to check the entry for money market accounts and noticed the change.

I spent several flustered minutes verifying that I could boost both accounts over $2,500 and still have enough cash to pay the bills that needed paying. I also transferred some money from elsewhere into our checking account, although it'll be a couple of days until it arrives.

As I said, it was as much luck as anything. I was lucky that I happened to log into our bank today, lucky that I noticed the link, lucky that I checked the entry on money market accounts, lucky that I noticed the change, and lucky that we had enough money on hand to cover the higher minimum.

But it was more than just luck. I run our finances with a certain amount of slack — I keep cash on hand specifically to handle situations like this. And, of course, I make a point of paying attention to that sort of thing, because paying attention is rule number one for avoiding bank fees.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Ways That Small Businesses Get Ripped Off by Banks

Julie Rains — Sun, 28 Nov 2010 17:37:03 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/ways-that-small-businesse...

Bank offerings for small businesses are often scaled-down versions of products and services designed for global corporations. Deposit-account features, treasury services, and credit products may not be relevant to your business's unique requirements. The disconnect is exacerbated by financial-industry definitions of small businesses according to annual revenue, often classifying independently-owned retailers with sales of $1 million or less in the same category as those producing $50 million each year.

The one-size-fits-all mentality may be costing you money. As a small business owner, you'll need to make sure that gaining access to a full suite of financial services (or your banker's desire to land a business account) doesn't dampen business profits.

Pay attention to the following areas, which you may consider either clumsily-designed financial packages with superfluous services or pure-and-simple rip-offs.

Account Analysis Fees

Small businesses that are eligible to receive a broad range of banking services are often placed on account analysis. Fees from services provided by various departments are aggregated and, theoretically, offset by credits associated with interest earned on account balances.

The credit for which your business qualifies may be substantially less than the reasonable customer may calculate. Account balances may be adjusted for bank reserves, which include percentages mandated by the government as well as those dictated by bank policy.

Banks may also reduce balances or generate charges associated with "float," which is especially troublesome for those companies who manage cash prudently but tightly. In this scenario, your account balance may be reduced when your company initiates a payment, not when the payment clears. (For example, if a check cleared on Day 10 of the month, the bank may presume that the check was generated on Day 5, mailed or transmitted on Day 6, and presented for payment on Day 9 so that — according to the bank — money should have been available to fund this transaction on Day 5. If the account balance would not have supported this payment, then the bank reduces the balance eligible for interest or generates a charge for extending a short-term loan.)

Ask for a statement if your bank doesn't automatically provide your business with the analysis portion attached to the monthly invoice. Review fees for standard maintenance, specialized services, volume-based transactions, and overdrafts along with any credits for balances. Scrutinize details to make sure that your business is not paying for unnecessary services. Note trends to determine if higher balances are rewarded with statement credits.

Delayed Posting of Deposits

Some banks tend to wait to make funds available for your business's use. This practice can cause a couple of problems:

Your business won't earn interest until the funds are officially released and posted to your account, reducing the potential for offsetting service charges
Your business may incur overdraft fees because funds to cover vendor payments are not available.

Ask your banker about policies regarding the release of funds. Probe to discover the types of deposits that may be held longer than expected, such as out-of-town checks. Understand that tellers may make decisions to hold funds to prevent fraud.

When you or your employees make deposits, review receipts for information to determine when funds will be made available. If funds are to be held longer than usual, speak to the manager about the rationale behind this decision and request that funds are released according to a more reasonable schedule.

Low Interest Paid

Banks may charge 6.0% interest for a loan but pay your business 0.25% on a deposit account.

Hold as little cash as possible with your bank. Use cash to claim early-pay discounts and boost your profit margins instead of earning a minuscule amount of interest. Avoid borrowing money, and find ways to use working capital to grow your business. (See this article on managing finances to support growth.)

Overpriced Products and Services

It's common knowledge that paper checks can be purchased from a third party for a fraction of the price that the bank resells these products. Fees for other services, such as charge-card processing, receipts of payments from customers outside of the U.S., and e-check capabilities may also be higher if delivered by your bank rather than an outside provider.

Compare monthly fees and transaction charges among bank and non-bank service providers. Find reliable, inexpensive sources of financial services, and sign up directly with vendors.

Too-Restrictive Loan Covenants

Banks may place covenants on loans that are reasonable (that is, set standards for company financial performance that indicate stability and effective control of finances). They may also create situations that may too readily trigger loan defaults.

Scrutinize bank requirements and negotiate loan covenants that are achievable.

Conventional wisdom says that establishing a relationship with a bank now will reap rewards years later. Bankers may be interested in historical performance, but they also have to focus on selling to profitable companies today. Look for a mutually beneficial relationship in which products and services are designed for your business's needs.

This article is from Julie Rains of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

My Bank Stole My Grocery Money

Sierra Black — Fri, 04 Dec 2009 07:01:50 +0000

Dear Wainwright Bank,

You appear to have stolen my grocery money.

I was surprised and alarmed to see, when I checked my bank balance this morning, that I had been charged $92.97 in overdraft fees. My statement clearly shows that no overdraft took place.

I showed my bank statements to a manager at your Davis Sq branch and asked her to explain what had happened. Her explanation was long and convoluted. Ultimately she gave me to understand that:

my bank statement is not an accurate reflection of the transactions on my account
you don’t process any transactions from the weekend until Monday
which I knew, and was sort of counting on when I raced to the bank Monday morning to deposit my paycheck
which cleared on Monday, according to your records, before any of the debits were processed
but you charged me an entire week’s grocery money in overdraft fees anyway
for one overdrawn check and — I love this — two ATM withdrawals made on Saturday.

This last part is really the kicker. On Saturday, there was over $500 in my bank account. My husband took out $20 to buy groceries and later $10 to pay for parking and tolls to get his son to the airport. Leaving, let’s be clear, over $500 in our account.

On Sunday evening, my student loan payment posted. That payment, along with a transfer scheduled for Monday, would have overdrafted my account. Which I knew. See also: so I raced to the bank on Monday morning to deposit the check I received in Saturday’s mail.

Yes, I was cutting this pretty close. A Real Grown-up would keep a bigger cash buffer in her checking account, and always balance her checkbook perfectly. Fail. I thought I might get dinged one overdraft fee for depositing the check on the same business day you were processing my loan payment.

But charging me an additional $64 in overdrafts for taking CASH out of my account? When there was money in it?

I had to ask the bank manager twice if that really happened. When she assured me it was bank policy, I had some stern words for her.

They started with, “How can you sleep at night?” and ended with, “This company makes me sick.”

Here is the gist of what I said between those sentiments:

I want to know how you as an organization dare to present yourselves as a community bank invested in social justice. This draconian banking practice perpetuates cycles of poverty for your most vulnerable customers.

For me, this was a rare bad break. It’s also a problem easily solved: I just took my business down the street to Citizen’s Bank. They offered me an overdraft line of credit with no fees (only paying interest on overdrafts), a better savings rate, and an incentive program for using “green banking” features like paperless statements and online bill pay. On top of that, they’re giving me a $100 bonus for opening an account with them. So I’ll be getting my grocery money back — from your competitor.

For people with less stellar credit or reliable income, however, your practice can be ruinous, trapping them in a cycle of debt they can’t get ahead of. That’s why new regulations make it illegal. Those regulations haven’t taken effect yet, but I would have hoped a “progressive” bank would be ahead of the curve on Not Screwing Over Its Poorest Customers.

Let’s talk a bit about your malicious accounting process, shall we? It’s no accident that you processed my transactions the way you did — debits before credits, with the largest debit deducted first even though it came in last. As one of my colleagues here at Wise Bread reported last week, banks use this shifty accounting to screw customers for excessive fees. It’s not just me being irresponsible once in awhile; it’s a system designed to rob people exactly at the moment their finances are least resilient. You’re making a killing on this. Overall, banks are expected to make over $38 billion on overdraft fees this year.

Again, this practice targets the weakest links in your system. You like to advertise yourself as helping the poor in the communities you “serve,” but even most big conglomerates have clued in and are starting to scale back their overdraft rackets. You’re not an alternative to the big bad banks. You are the bad guys.

It is a genuinely sad thing for me to finally sever this relationship. I’ve stuck by you for nearly a decade, feeling a loyalty to your stated mission that led me to excuse your high fees and poor communication skills. I really want my money to be handled by a bank that cares deeply about the community it does business in. A bank that puts social justice, human values and environmental stewardship on par with profit motive.

Sadly, you are not presently that bank. You’re a wolf in progressive clothing, preying on the neighborhoods you pretend to serve. I hope you will look seriously at reforming these practices and become the bank you pretend to be.

In the meantime, I look forward to doing business with Citizen’s, where I expect that my family and my money will be treated with respect.

No love,

EDIT: Since writing this post, Wainwright has received several angry letters from other customers. A bank manager spoke with me today, refunded my grocery money and apologized, but explained again that this is bank policy and perfectly legal. It may be legal but it is still wrong. Thank you, Wainwright, for doing the right thing with me in this instance. Please reform your predatory banking practices for all your customers, not just the squeaky wheels.

This article is from Sierra Black of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Avoid Bank Fees

Philip Brewer — Fri, 28 Aug 2009 20:00:01 +0000

I don't pay any bank fees, except rental on my safe deposit box. That leaves me of two minds about the fees. On the one hand, I feel bad because the fees tend to fall hardest on the people who can afford them the least — the poor, the ignorant, the stupid, the careless, the lazy, and the unlucky. On the other hand, the fees other people pay help cover the costs of the many free services that I get from the bank. (See also: 7 Banks Still Offering Free Checking and Great Interest Rates)

Economic research firm Moebs Services just announced results from a survey that indicated that fees are now providing the bulk of bank profits. In fact, at almost half of all banks, overdraft fees alone exceed total bank profits.

Banks use a lot of tricks to maximize the fee income. In particular, they process the largest checks first. If one big check overdraws your account, the bank can then charge an overdraft fee on every check that clears. If they processed the checks in the opposite order, they might only be able to charge the overdraft fee on the last one. (Another trick is to add new fees with little fanfare, so that you don't know you're paying them until you check your bank statement.)

Most people are like me, paying little or nothing in the way of bank fees. For example, according to an FDIC report last year, less than 14% of all bank customers pay over 93% of the overdraft fees.

Although the poor tend to get hit most with fees, it isn't primarily the poverty that does it. The key to avoiding bank fees is keeping your finances under control. The only way that just being poor exposes you to fees is that the narrower the gap between your income and your expenses, the harder it is to keep your finances under control. You have less room for error and are more vulnerable to simple bad luck. But being poor tends to be associated with other things that make it tougher to avoid bank fees.

If you're poor, you can't afford to keep a large minimum balance. If your parents were poor, they may never have learned that it's not necessary to pay ATM fees and bank transfer fees and fees to check your balance and fees to talk to a teller. And whole categories of poor people are not only poor — they're poor and they don't speak English, or they're poor and they come from a cultural background that doesn't trust banks. These people easily fall victim to predatory firms that charge huge fees for services like check cashing and small loans.

So, poor or not, how do you avoid bank fees? After the obvious things — don't overdraw your account and don't go over the limit on your credit card — the most important step for avoiding bank fees is to read the stuff from your bank and understand what services are free and what services aren't. Every bank makes many services available free to certain customers — you just need to make sure that you're one of those customers.

Common Special Deals

Bank fee structures are, of course, ridiculously complicated. Most banks have multiple fee structures, depending on things like what kinds of accounts you have, which services you use, minimum balance, and even age (seniors often get good specials; students often get crappy ones). There are a few practices that show up pretty often, even if they're not universal, so it's worth being aware of them.

High minimum balance

Lots of banks offer no-fee deals for people who keep a certain minimum balance. (At some banks there are several tiers of these.) With interest rates as low as they are now, it costs very little to leave some cash lying around in your checking account. It'd take a couple years for the lost interest from having $1000 sitting idle in your checking account instead of in an internet savings account to add up to as much as just one bounced check fee.

Packages of accounts

Lots of banks offer package deals, where certain fees are waived if you get a certain group of accounts (savings, checking, line of credit, etc.). The idea is that if they can pull in a certain critical mass of your financial activity, it'll increase the chance that you'll use them for other, high-profit services like your mortgage and your IRA.

Packages of services

Many banks have long waived some fees if you have your paycheck directly deposited into the bank. More recently, some banks have started offering higher rates to people who agree to some minimum number of debit card transactions. Others offer deals to people who use the bank's bill paying service.

Any of these can be a excellent deal if the packages or minimums happen to match how you were going to arrange your finances anyway. The banks are all a little different, so look around and see if you can find one that's a good match.

This is another place where the poor tend to get nailed: If they live in a poor neighborhood, they probably don't have a dozen different local banks to choose from, reducing the chance that they can find one that offers a deal that matches their circumstances.

Other Financial Fees

Because there's so much money in fees for financial services, everybody is trying to get in on it — including states. Many states have started making cash assistance (unemployment, food stamps, etc.) available via a debit card — but a debit card that comes loaded up with fees: fees for using an ATM, fees for checking your balance, fees for trying to charge more than is left on your card. There are even fees for not using your card! (That probably doesn't deserve an exclamation point — lots of kinds of accounts have inactivity fees these days — but I still find it shocking.)

Like with other bank fees, most of these are avoidable if you understand the rules, and not too onerous as long as the cash assistance isn't your only source of income.

The easiest thing to do for things like unemployment insurance where you're allowed to get the money as cash, is to do just that. You typically get one free cash withdrawal per month at an in-network ATM. Use it to get all the money out and put it into your regular bank account. If you're not allowed to get the money as cash (as with debit cards for food stamp benefits), you can minimize fees by treating it like an ordinary debit card — track each transaction and keep a running balance so you don't have to pay a fee to check the balance. Then, use the card to pay for whatever's allowed until the money runs out.

Avoiding fees is pretty straightforward for people whose finances are under control. They know what services they need, so they can shop around and find out which banks offer those as free services (with which kinds of accounts). They pay attention to things like which ATMs they can use for free. They keep track of their balance and don't overdraw their account. If they need a service that isn't free, they shop around to find where they can get it cheapest.

It's not that much work to nail down all these details, and over time it can save a fortune in fees.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: