Is your bank ripping you off with bank fees?
It’s just been announced that banks made $10.5 billion in fees in the financial year ended June 2007. That’s up 8% on the previous year, but banks say the increase is due to higher demand not higher charges. Defying that statement however, are credit card transaction fees, including cash advances, which were up 12%, while account servicing fees rose 11%. Credit card penalties and foreign currency conversion fees rose 16%.
It seems bank fees can be a licence to print money and no-one wants banks profiting at their expense. So how can you eliminate, or at least minimise, bank fees from your life? There are a few basic rules to remember in order to do this. The first is to know the product you are using. Read the fine print and understand what it will and won’t do. Does it suit the way you bank? If it doesn’t work the way you do, you are likely to incur fees as you go along.
See how your current banking products rate by completing the following checklist:
1. Bank fee-free. Use accounts which are free of fees and charges. Different charges may apply for different transactions, such as over-the-counter, electronic, telephone or internet banking transactions. If you are not sure what you are being charged and whether or not there are more suitable products you should be using, ask your financial institution. This simple dialogue could save you hundreds per year.
2. Stay above your limit. Know what the minimum monthly balance is on your account and never go below it. That way you can say goodbye to costly over-the-limit penalties.
3. Use your bank’s ATM. Search out the locations of your own bank’s ATMs at frequently used places (home, work etc). Use these ATMs whenever possible to avoid being slugged a fee of $1.50 to $2 each time. Think about how often you use ATMs and you may be unpleasantly surprised at how often you incur these fees because they all add up. A little more planning could be in order. For instance, getting some extra money out when you pay on EFTPOS for your groceries counts as one transaction instead of two.
4. Avoid cash advances. Cash advances on your credit card are the most expensive way to access money and should be avoided at all costs, if possible. Typically, you will be charged either a fee, say $4.50, or a percentage, say 2%, of the amount advanced. The worst thing about cash advances is that the full interest rate is charged from the moment of transaction. So don’t be caught thinking you’ve got 55 days interest-free to pay it off. You haven’t. It’s clocking up interest straight away.
5. Use discounts. Packaging loans and transaction accounts can waive fees or attract discounts. Bank packages usually include home loans, personal loans, credit cards and term deposits etc. Transferring money within the same bank will also save you a bundle. Investigate what you need to qualify for discounts at your bank. There may be a better, less costly way of structuring your accounts to make the most of discounts.
You don’t need to wait until you hear about the banks’ massive penalty fee revenues to shake you out of your procrastination. It’s always wise to keep regular tabs on your bank accounts and make sure they are still working for you. Everyone’s circumstances change somewhere along the line and what is perfect for you now may not necessarily be so in the future. There’s no substitute for comparing financial products, even if it’s just to reassure yourself that you’re getting the best deal already.
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