How to Avoid Getting Nickel and Dimed With Fees
As banks try to shore up their balance sheets to make up for the billions of dollars in revenue they stand to lose from new regulations this year, they're tacking on more and more fees. The nation's largest bank, Bank of America, which does business with half of all American households, gets an easy 12% of its revenue from fees, according to financial services firm Sandler O'Neill. From account service fees, transaction fees, surcharges to overdraft fees, consumers are paying through the nose. And it doesn't stop there. Banks are now raising fees on the old standbys (like stop payments and wire transfers, for example), and dreaming up new fees for 2011. Expect to see monthly fees on checking accounts (a hot topic right now), fees if you don't bank electronically, fees for paper statements, fees if you want to speak with a bank teller, annual fees on debit cards, and even monthly debit card fees unless you meet certain -- high! -- thresholds.Your best defense: If there's ever been a time to consider taking your business to a credit union, now would be it. Credit unions are not only very accessible and less restrictive, but more importantly, they offer a kinder, gentler experience all around. Plus, they offer higher rates on deposits and lower rates on loans. To find one near you, go to the National Association of Federal Credit Unions' consumer website -- culookup.com.
Many consumers have given up on credit entirely because it's become too expensive. While rates on other loans are at historical lows, credit card rates have been creeping up -- they're now at an average 14.4% compared to 11.8% the same time a year ago, according to Bankrate.com) and too complicated. In addition, issuers have been cracking down -- and are continuing to close -- inactive accounts and introducing new annual fees, surprise fees on petty things like customer service calls, and higher rates on everything from balance transfers to cash advances, says credit card expert, Geri Detweiler. According to investment bank R.K. Hammer, fees currently account for a whopping 48% of all revenue for credit card issuers -- that's up from 31% 10 years ago.
Your best defense: Continue chipping away at the credit card debt (In case you haven't noticed, monthly statements now spell out the costs of carrying a balance--that should be an incentive in and of itself!), and work on boosting your score because the best terms and conditions are reserved for the most creditworthy (think: 740+, says credit card expert, Curtis Arnold, of cardratings.com).
Look no further than the airline industry: it started with fees for snacks, pillow and blankets and quickly moved to fees for booking over the phone, fees for checked luggage, preferred seating and more. What's next -- a fee to use the restroom? To talk to an agent rep? With the industry's profitability riding on ancillary revenue (These types of fees brought in an estimated $22.6 billion in 2010, according to Jay Sorensen, president of IdeaWorks, a company that tracks consumer trends), you can imagine executives are in the back rooms drumming up new ones as we speak, particularly as oil prices hover in the $90 a barrel range (and are expected to go higher).
Your best defense: Keep those fees at bay by researching and comparing airlines to see who charges the least and is the most flexible (JetBlue and Air Canada, for example, give you the first checked bag free; Southwest gives you two free bags!), make sure your carry-on is within the legal limits so you don't get caught having to check it at the gate, keep all bags below the weight limits, always bring your own snacks, and be sure to check out credit card offers because there are some good ones out there. For example, Delta's SkyMiles branded American Express card allows you and up to eight others on the same reservation to each check a bag without charge. For more tips, click here.
As if college tuition wasn't costly enough (an average $30,000 a year; upwards of $50,000 for the top tier private universities, according to the College Board), these days it's really just the beginning. From orientation fees to lab costs to even library fees, schools are hitting parents wherever they can in order to make up for financial shortfalls.
Your best defense: Experts advise minimizing the pain by simply budgeting for these surprise fees. That means setting aside 10% or so of the tuition costs -- each year. Gasp.