Bank Fees

Banks are in business to make money. Just like the rest of us, they need income to survive. They qualify and quantify their customers like any industry does, and in many ways they are in fact fair in charging fees according to how risky it is to do business with any prospective customer. This practice is called risk-adjusted pricing. (For example, customers with higher credit ratings pay less interest than those with lower credit ratings.)

Fees are another big way banks make money. No one is immune to them no matter their credit score, but you can easily eliminate or minimize what you pay. I often see families using several cards and methods of making purchases, and racking up $50, $200 or more in fees every month. That’s money that could be used to pay down debt or save for vacations or retirement—things that are a lot more fun, worthwhile and responsible than fees.

Did You Know

In poor neighborhoods, very little lending occurs. However, banks in these neighborhoods often boast profits higher than branches in wealthy neighborhoods.

Why? These banks collect more fees!

Here are some of the most common fees assessed by banks:

• Overdraft fees. We’ve pretty well covered this one.
• Check-writing fees. Some banks allow only a certain number of checks to be written from an account each month, then charge by the check.
• Under-Limit fees. Often assessed on savings accounts, if your minimum balance falls under a set dollar amount, expect to pay for it.
• ATM fees. Some accounts have restrictions on the number of transactions per month; if you use ATMs more than the allotted number, you’ll be charged a fee. Also, if you use an ATM operated by a competing bank, you’ll likely be charged a fee from both the ATM’s bank and your own for going out of network. These fees can be as much as $5 per transaction. You can also be charged for withdrawing cash while making a purchase (you’ll see the fee on your store receipt and bank statement).
• Account inactivity fees. A fee frequently associated with credit cards, but one that can also be charged against a checking or savings account if the account is considered dormant.

Your banking relationship is give-and-take. Select your bank based on what it can offer you with the understanding that the bank is there to make

Checklist: Financial Tools

The most important tools to have in your financial first-aid kit are:

• Cash
• Bill-pay account
• Separate purchase account for each spender in the household, which may include debit cards or preferably reloadable purchase cards
• Credit card (optional if you have a debit card)
• Savings account

Selecting the Right Bank or Service Provider

Most people stay with their bank for life unless they physically move away or become extremely frustrated with the service it provides. Some will even put up with considerable grief from their bank because they know the tedious alternative: Waiting to close their accounts after they’re inactive, and starting going to a new bank to get new debit cards, checks, auto drafts and auto deposits.

Banks don’t make it easy to walk away, so don’t enter into your relationship with them lightly. Here are some of the things you should look for:

Does your employer offer special banking products? Target employees get special product enhancements from Wells Fargo due to affiliation at the corporate level. Just like health insurance, you could get a better deal through your employer (or your spouse’s employer). Look for:

• Free products. Whenever possible, select a bank that offers free checking, free savings accounts, free online banking and bill pay. With certain balance requirements, you can even find accounts with free checks or travelers checks.
• Location, location, location. Trust me, you do not want to be driving around in a snow storm looking for a branch to make a deposit to cover the cost of the snow tires you just put on your car.
• Product availability. If you can select a bank that offers cradle-to-grave products, such as children’s accounts to mortgages to investments, you will likely develop a stronger relationship with your bank, making you a more preferred bank customer.