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USA Today Article: Rising Bank Fees


How do banks make their money? Nowadays a lot of it comes from fees. This USA Today article reports on this problem and how it's impacting consumers. Unlike interest rates, it's not easy to shop around for the banks with the lowest fees. As the article mentioned, banks don't advertise low bounced-check fees.

How much money do banks make from fees? Here's what the article stated:
Last year, banks, thrifts and credit unions collected a record $37.8 billion in service charges on accounts, more than double what they got in 1994

The article listed several of the common occurrences that trigger bank fees:
  • bounced-checks
  • use of other banks' ATMs
  • courtesy overdraft
  • service charges for checking accounts
  • late payment fees on banks' credit cards
  • fees for over-the-limit charges on banks' credit cards

A new type of fee called the courtesy overdraft was described. A better name would be the kick-you-when-you're-down overdraft. If you don't have enough in your account to cover a check, the bank pays it and charges you up to $35. What's insidious about this is that customers don't sign up for it, and it usually costs a lot more than using a credit line to cover overdrafts. It essentially becomes a loan with triple digit interest rates. One expert quoted in the article said that "Banks have essentially gone into the business of payday lending.".

Here's something in my opinion that's even more insidious. Banks often don't even alert customers when the customers are about to overdraw from an ATM or debit-card purchase. And don't rely on the available balance you see at the ATM, because some banks include the amount they'll let you borrow in that balance. If you have free checking at your bank, you may want check if this courtesy overdraft is included. If it is, sign up for an overdraft line of credit or a transfer from savings. These fees are likely to be less.

The article has several tips for reducing banking fees. One of them is to go online. It didn't mention particular banks, but I would recommend USAA Bank. It has a great reputation for its checking account. Their Mastercard has no cash advance fee. Also, if you overdraft from your account, they'll do a cash advance on your Mastercard. You'll have to pay the interest, but at least there won't be fees. Check this post for more info about USAA Bank.