Debt management includes watching out for hidden bank fees

Way back in the 1970’s, using a bank was downright difficult. Banks kept strange hours; many were typically open only from 9 AM to 2 PM on weekdays, making it impossible for the average customer to actually set foot in the place. Of course, virtually any financial transaction required interaction with a teller, and that, combined with the odd hours, made it really hard to do business with a bank. On the other hand, fees were minimal, and transactions were straightforward. How times have changed.

Today, it’s much easier to do business with a financial institution. Most are open six days a week and often are open throughout the work day. Automatic teller machines are everywhere, and you can often do business with your bank without even going near it. Unfortunately, doing so is more expensive than ever, and consumers should be aware of the numerous hidden fees that banks charge for their services. Those who tend to have debt and money management problems should be careful, as the fees can be astronomical for those who are careless or financially irresponsible.

It’s great to use an automatic teller machine (ATM) instead of the bank. They’re everywhere, they’re always open, and they’re easy to use. Watch out for the fees, however. If you use an ATM that is owned by a bank other than your own, you could end up being charged a fee by both banks. A $40 withdrawal from another bank’s ATM could cost you a $2 fee from your institution and a $2 fee from the one that owns the ATM. That’s a 10% fee for the convenience of using another bank’s system. Another fee associated with the ATM is the fee that some banks charge to transact with a teller. That’s right. Banks are so confident in their ATM system that they now expect you to use them instead of using a real human being. If you hand your deposit to a teller instead of using the ATM, you could be charged $3-4 for the privilege.

Consumers who use a debit card, and that’s just about everyone, should watch out for overdraft fees. A debit card looks like a credit card, but functions like a check, taking money out of your account immediately. Many firms now include automatic overdraft protection on their accounts, and they will allow you to use your debit card or checking account to spend more than you have in your account. That’s a nice thing to do, but they typically charge $25 or so for this “convenience.” If you merely spent $10 more than you had in your account, the $25 fee amounts to a 250% interest rate on the short-term loan of $10. You may not even know if this is happening; your bank will not notify you when you make your purchase that you are overdrawing your account. This is quite a profitable venture for the banking industry, which took in some $10 billion in overdraft fees in 2004.

Some banks are heavily promoting online bill payments, citing convenience. That’s true, but you may be charged for the service. One major firm charges $6.95 per month for online bill payment, and that fee applies even if you pay just one bill! It takes eighteen 37¢ stamps to make up for that fee; if you are paying fewer bills you should mail them instead.

Many of these fees are not prominently disclosed, so be sure that you read your bank statement carefully. Otherwise, you could easily end up paying $50-75 per month in service fees.

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