Is Your Bank a Money Siphon?
Instead of Saving Your Money, It May be Costing You
By Kara Stefan
always been one to compartmentalize money. In other words,
I pay for staples and bills from one account, invest from
another, and keep both long-term and short-term savings accounts.
It may sound nutty, but that's just what helps me stay budgeted.
At the same time, four different bank accounts can be rather
expensive. I try to cut costs by using those plans where I
promise not to enter the bank--which is a totally absurd concept--but
they somehow get me anyway. Six bucks a month for a checking
account. Three bucks for every instance of overdraft protection
covered by my savings account.
It's getting worse. Online banking, which I might as well
do since I can't visit with a live teller anyway, has increased
competition within the banking industry--resulting in higher
interest rates and lower bank fees. Brick-and-mortar banks,
however, have yet to respond in kind.
Instead of dropping fees and raising rates, they continue
to do the opposite. According to Bankrate.com's fifth semiannual
checking account pricing survey, the interest checking account
is just about the worst bank product available.
That's because while interest rates have been rising over
the past year, the yield on interest-bearing checking accounts
has remained static, at an underwhelming 1.17%. Average monthly
fees have risen as well, from $9.59-$10.43. So basically,
you earn less but pay more. You could be paying out approximately
$125 a year just to earn $23 in interest.
Here's the takeaway: Don't be tempted by an interest-bearing
account; on the other hand, don't necessarily jump at those
"no-frill" accounts with lower fees either. You may end up
paying more in fees if you tend to deposit, withdraw, or write
more checks than allowed each month.
Instead, shop for a bank account that meets your individual
needs and habits.
ATMs from Hell
If you're like me, you bank choice is determined by which
has the most conveniently placed automatic teller machines.
Typically, that means you're good to go at work or near your
home. But what about when you're at the food court in the
mall or need extra cash to buy coffee and a magazine at the
airport? That's when you're liable to cough up serious cash.
You may also be surprised to learn that some of these seemingly
"generic" ATMs are actually owned by your bank, but because
they've failed to brand them with their logo, they may continue
to charge their own customers outrageous fees.
Jeremy Knapp of Seattle is currently suing Bank of America
for just this kind of practice, since its customer agreement
clearly states that B of A customers will not be charged fees
on any ATMs owned by the bank.
"From December 1995 to February 1997, the total number of
bank-owned ATMs grew by 30%, while surcharging on ATMs that
were in place at the beginning of that period grew by over
120%," reports David Sorkin, a law professor in Chicago.
"The truth is that banks are making more money than ever,
and a higher proportion of it is coming from fees--including
surcharges--than ever before."
Here are a few tips for avoiding ATM fees:
- Avoid "unbranded" ATMs altogether.
- Get cash back through your debit card when making purchases
at your local grocery store, gas station, or drug store
(83% of banks don't charge for this transaction).
- Cut down on ATM visits by taking out more money each visit;
leave a portion at home if you're apt to spend whatever
you have in hand.
- Look for the "No Surcharge" symbol at the ATM.
- Credit unions and smaller banks are less likely to impose
Stop Payment Fees
Stop payment fees now range anywhere from $15-$35 and represent
some of the highest charges banks impose on customers.
But even more startling: the stop payment service typically
only lasts 6 months. That means that if your landlord finally
finds your lost rent check more than 6 months after you stopped
payment and wrote him another, he can still cash the old one.
Match Aptitude to Account
When you shop for a bank and a bank account, first consider
your personal habits and money management aptitude. If you're
not above bouncing a check now and then, be sure and ask what
the fee is for this. Shop around for the lowest fees and charges
on the services you're most likely to use...or abuse.
And don't forget the online world. While it's tougher to
get cash from a pure online bank, you may enjoy the perks
of lower fees and higher interest rates. But even if you maintain
an account with an offline institution, consider services
such as online bill pay to help you save money. The latest
trend among e-billers is to offer this service for free, with
the added bonus that you save both time and money when you
no longer have to write checks.