Bank Fees

Banks make money by accepting money from you and paying you interest on the money and then loaning it out a higher rate of interest. That sounds like a good way to make money, but banking is competitive and there is a bank on every corner trying to do the same thing.

So, banks have to come up with other ways of raising money, and not all of them involve cutting costs or increasing the spread between the interest rates they pay on an account and the interest rate they return on loans and investments. Some of them have to do with getting you to pay more for services, and for problems like negative balances in your checking account. Here are some of the most common fees charged by banks.

You’ve probably never bounced a check, but lots of people do. Unless you are have the tenacity of an accountant it’s easy to forget that ATM withdrawal you made late Saturday night, or the online bill payment that comes due every 15th of the month, or the check card purchase you made at the mall. In your mind you still have $200 in your account, but in your bank you only have $14.62. That’s going to be a problem if you write a check for $80. Chances are that the bank is going to cover your check and not let it bounce. Aren’t they nice? Maybe, but that isn’t why they do it. They do it because they want to charge you between $20 and $35 each time your balance goes negative, and then they want to charge you $5 every day until you have a balance above $0. This is called Overdraft Protection and banks make a lot of money on it. They’re protecting you! Now pay up.

I have to pay my daughter’s college tuition bill tomorrow or she won’t be able to register for next semester’s classes. I can get the money into the school’s bank account on time if I do a wire transfer. There isn’t really any wire involved in a wire transfer, but there is a fee involved. Normally a bank will charge you between $10 and $30 to transfer funds from your account to someone else’s.

Many banks will charge you a monthly service fee just to have an open account at their bank. These fees vary from bank to bank but they are rarely less than $5 and rarely more than $15. Nevertheless, they build up from month to month and year to year. Some banks allow you to avoid the fee if you keep a minimum balance of $1000 or more. Bill Gates, why are you reading this article? The actual minimum balance requirement may be more, or less, but if you struggle before a payday to keep your balance above water, you may get socked with a minimum balance fee.

Some banks will charge you to use your ATM or check card. It’s so convenient in the grocery store or casino to want a little extra cash or to pay from your checking account instead of with cash, but if your bank charges a fee, be careful.

You may also have a credit card through your bank and they may charge you an annual fee just to see if you are paying attention. If you have good credit it isn’t difficult to find a card with no annual fee.

Banks also will sprinkle your financial life with unexpected fees in unexpected places. You may incur a fee for writing more than a specified number of checks per month, or for using a teller more than three times a month. You may pay extra to bank online.

Large and small banks lure you in with signs in the window where the word FREE is larger than any other word. When you go inside make sure that you understand what is FREE and what has a FEE so there won’t be any surprises. Look here at www.selectrates.com to compare the various savings vehicles available and choose the best savings for that maximizes return and reduces cost based on your financial lifestyle.

This entry was posted on Saturday, October 11th, 2008 at 3:20 pm and is filed under Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.