Banks and their customers are locked in an ongoing struggle these days - the former to increase profitability, the latter to avoid the new fees that they're now charged for banking services. (For related reading, also take a look at Credit Card Perks You Never Knew You Had.)
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New legislative caps on bank credit card charges and restrictions on overdraft fees, checks returned for insufficient funds and other penalties have put the squeeze on profits at financial institutions. As a result, banks have found new ways to charge their customers for services.
But smart consumers of bank services can side-step most of the new fees imposed by these financial institutions by investing some time and effort. Start by carefully reading the disclosure documents provided by your bank for every service. Once you've become familiar with the various fee policies of your bank, here's how to avoid them.
Checking Account Fees
Once upon a time, in their ferocious competition for depositor dollars, banks offered free checking. Now, however, among the most common banking fee is the monthly maintenance charge on checking accounts. Many banks will waive the fee if the customer keeps a minimum monthly balance in the account. The minimum amount may vary from bank to bank, with $500 and up cited most frequently. Customers are advised to shop via the Internet for the deal that best suits their checking account needs. Some banks will also waive the fee if the customer buys other bank services such as opening a money market account, or initiating an electronic direct deposit of wages, social security or pension checks. By authorizing your bank to employ automated check handling (ACH) procedures to pay certain monthly debt obligations such as a mortgage or insurance premium, your bank may also waive the checking account fee.
Keep scrupulous records of deposits and expenditures and watch your daily balance. Record every transaction in your check ledger as soon as possible. Do not sign on to the overdraft protection program at your bank. Every bank is now required to provide full disclosure of their overdraft policies and fees, and are obligated to obtain customer approval for enrollment in the overdraft protection option.
Point of Sales Dangers
Taking cash at a point of sale in some store where you happen to be shopping may seem like a good idea at the time because there's no ATM fee. But you won't be warned if you overdraw, thus incurring an overdraft fee. That may be one reason to resist the point of sale cash withdrawal. Debit card purchases can also be hazardous to your checking account balance. Sellers of goods and services can impose a hold on your checking account for up to three days to guarantee that the funds are available until the bank completes the debit transaction against your account. To side-step the hold penalty, use your debit card PIN, which charges your account almost instantly. Some customer-friendly banks will provide a warning via e-mail or phone text when balances sink to near-overdraft levels. Finally, stash a few extra dollars in your account - say $100 to $200 - as a buffer between you and the potential to write checks for more money than you have on deposit.
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Fees for domestic wire transfers - the electronic transmission of cash from one bank to another - vary from bank to bank, with some banks not charging for this service if the customer's name is on the transmitter's and recipient's account. Another type of transfer is the overdraft transfer which debits savings accounts for overdrafts, for which the bank charges a lower fee for the transfer, typically $5, rather than charging the overdraft fee, which can range from $25 to $39. By maintaining a savings account, and arranging for the transfer from savings to cover overdrafts, you can avoid the higher overdraft charge.
Argue Your Case
Experts in banking policy urge bank customers to challenge questionable fees with their personal bankers. Often a fee will be waived for good customers or for new customers.
Where to Keep Your Money
A checking account in which a minimum balance is maintained is probably the best deal for customers. Banks will often grant special privileges and waivers of certain fees if you maintain a pre-determined amount of cash in the account. Although a savings account returns minimal interest, keeping such an account in your bank may help in cutting overdraft fees.
Be Persistent and Patient, But Don't Expect Perfection
Persistent and patient shopping around for a bank, including online banks, which best provides for your banking needs with reduced fees or no fees at all will pay dividends in savings. Select one bank for all your banking needs, but keep in mind also that no one bank may be a perfect fit and you may have to make compromises. (For additional reading, also take a look at The Ins and Outs of Bank Fees.)
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