Bank fees: What you don't know CAN hurt you!

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Tell me if this scenario sounds familiar:

You deposit your paycheck into your account. The check is drawn on a major bank; however, for some reason, your bank doesn't feel like cashing it for a week or so. When they finally do credit your account, your rent check (which was presented a week after your paycheck) appears to bounce because your paycheck still hasn't been credited to your account. Your bank covers the rent check, but hits you with a $25 (or $35 or $50) fine for insufficient funds, even though they've basically been holding onto your money for a week.

Maybe this has never happened to you. Perhaps you have direct deposit or bank at the same company that handles your paycheck. Still, chances are that you've been hit with a questionable or extravagant fine from time to time. If nothing else, you may have simply withdrawn money from an ATM that isn't owned by your bank, leaving you with a $2-3 fee from the ATM and another buck or two from your bank. A few moments later, and $3-5 lighter, you find yourself wondering why, exactly, the bank needs to charge you so much for a measly $20.

The next time you look at your bank statement, add up all the fees. You might find yourself asking if the bank is conspiring to steal money from you. After all, it seems strange that they would allow a check to be presented for payment two or three times when they know that there is not enough money in your account. Of course, the reason becomes clear when you realize that they are charging you $25 each time the check bounces.

Over the past few months, the bank fee situation has gotten worse, a trend that some analysts connect to the subprime mortgage crisis. According to this theory, banks are upping rates to grab cash, which will help them offset their losses in other areas. Regardless of whether or not this is true, there is little doubt that those fees and penalties seriously add up. One good best method for minimizing them is looking at where you bank. Is your bank convenient to your work? How about your home? How far do you have to drive to get to an ATM? For that matter, look at the ATM that you regularly use, and think about switching to that bank. Bottom line, the easier it is for you to get your money, the less the likelihood that you'll use an ATM that charges fees.

Another method for lowering your banking fees is Bankrate.com. In only a few seconds, this free site can tell you all the banks that are located near your home and can give you a detailed comparison of their relative fees and payment structures. Chances are, you'll probably be surprised by how much you're paying your bank to hold on to your money.

Finally, be sure to read all those little slips of paper that your bank tucks in with your statement. In addition to the "special prize" offers and policy reviews, banks often sneak in notifications of rate changes. If you don't pay attention, you might end up ofsetting your bank's losses on a failed mortgage!

Bruce Watson is a freelance writer, blogger, and co-author of Military Lessons of the Gulf War and A Chronology of the Cold War at Sea.

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