How to avoid the most obnoxious bank fees

December 3, 2013, 12:28 pm John Wasik, Forbes.com Yahoo7

As the first in a wave of class action suits over $243 million in bank fees begins, let's take a look at how to dodge some of the most common charges.

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According to the latest survey from the Reserve Bank of Australia, banks collected $4.1 billion in fees from households in 2012. As ANZ customers head to court in the first of eight planned class actions involving 185,300 customers, eight lenders and $243 million in fees, let's take a look at how to avoid some of these common charges.

Related: ANZ class action could hit big banks

Bob Sullivan is author of Gotcha Capitalism and a great consumer advocate. Few writers are better at identifying rip-offs. He’s also a friend with a great sense of humour and indignation over how people are treated by corporations abusing them through fine print.

What grinds my grain are unnecessary fees levied by banks. Not only are banks already profiting from use of your money every day — they make loans against your deposits — the largest banks got larger after their bailouts in the 2008 meltdown.

This recent post on bank fees by Sullivan caught my eye on fees and how to avoid them.

Related: How to avoid bank fees

Overdraft fees

When you take out more money than you have on deposit, this could trigger an array of fees. I have a line of credit that the bank calls “overdraft protection,” but I could still incur fees.

“The fees add up fast,” Sullivan says. “The Consumer Financial Protection Bureau found this year that a consumer who overdraws an account pays an average of $225 in fees annually. That’ll eat up any measly interest you might earn on a checking account, and eat substantially into your deposits, too.”

If you choose overdraft protection, make sure you pay back your overdraft amount quickly. You’ll pay a high rate of interest on the loaned amount. Even when there are fees involved — usually $10 vs. $30 — you can still dispute them. I was levied a fee even though I had plenty of money in my account. When I went into my bank and complained, they dropped the fee.

Remember that banks have plenty of competition these days in the form of credit unions and online banks. Shop around.

Related: How to settle a bank dispute

Maintenance fees

Without a doubt, this has to top the list for most obnoxious bank fee. Basically, a bank is charging you for not keeping enough money on deposit. Money doesn’t need maintenance like a car or furnace. Here’s what Sullivan noted about these charges:

“These fees are tricky because the rules can change. The minimum balance can be raised from $1,500 to $2,000, for example, with little notice. This is why I reluctantly give this advice to account holders: always leave a buffer of at least $500 in your checking account, and preferably, $1,000. With savings rates so low, the cash won’t do you any good in savings anyway, so just put $2,500 in that $1,500 minimum balance account and pretend it’s not there.”

Related: Low income earners hit by bank fees

ATM fees

The tyranny of ATM charges is that you’re being nicked to withdraw your own cash. If you stay within your bank’s “network,” of course, this is not a problem.

“ATM fees creep up every year, and can now hit $6 or more when both the “foreign bank” and your bank grab their money as you withdraw. The average fee is a little more than $4. Do that twice a month and you’ll fork over almost $100 every year to the banking industry. That’s a silly mistake, however. Plenty of banks — particularly small banks and credit unions — offer free ATM withdrawals and refunds of “foreign” bank fees. Even if you don’t want to give up your mega-bank account, it’s worth opening a second account at a small bank nearby just for ATM withdrawals.”

The moral of the story: You don’t have to pay any of these fees if you’re a careful financial consumer. Shop around for no-fee accounts.

Related: Compare fee-free bank accounts on Moneyhound



John F. Wasik is an investor advocate, journalist, speaker and the author of “Keynes’s Way to Wealth: Timeless Investment Lessons from the Great Economist” and 13 other books.


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