Since the enactment of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act in 2009, banks as well as their customers are entangled in continuous struggle.
The banks are struggling to find ways to make up lost revenue and bank customers are looking for alternatives ways to avoid fees. Specifically, the new legislative puts caps and restrictions on bank credit card charges, overdraft and insufficient funds fees.
These services alone once netted banks billions of dollars in yearly revenue. As a consequence of lost revenue due to fee restrictions, some banks have found new and old ways to charge customers for services.
In fact Moebs Services, an economic research firm found that total revenue from overdraft fees grew from $30.8 billion in June 2011 to $31.5 billion in June 2012; amounting to a shocking $700 million increase. Banks are still raking in profits from overdraft fees.
Consumers can avoid many of the new fees by staying informed and on top of their bank’s disclosure documents. By carefully reading through your bank’s disclosure documents you become familiar with the various fee policies and learn how to avoid the banking fees.
1. Checking Account Fees
Once upon a time banks offered free checking and competition for customers was stiff. Nowadays, consumers would be lucky to find a free checking financial institution without restrictions. But here are a few alternatives to checking account fees:
Minimum Monthly Balance. Banks do offer free checking if a certain minimum monthly balance is maintained. The minimum monthly balance amount may vary from bank to bank; with $500 or higher usually being the norm.
Direct Deposit. Many banks will waive the monthly checking account fee if there is at least one direct deposit linked to your checking account. The direct deposit can be from your employer, social security or pension check.
Automated Checking Handling (ACH). Banks may also waive checking account fees by authorizing them to use automated check handling (ACH) procedures to pay certain monthly debt obligations like a mortgage or insurance premium.
2. Overdraft Fees
Overdraft fees can be avoided by keeping good records of your deposits and especially your expenditures. With online banking it has become much easier to stay on top of your daily account activities and account balances. Many consumers do not use their check ledgers. This is a mistake! Record every transaction in your check ledger as soon as possible, especially the ATM withdrawals and the point of sale transactions.
Point of Sale Transactions. The points of sale transactions are especially dangerous for consumers who do not keep a record of daily transactions. Getting that extra cash from the grocery store where you use your debit card sounds like a good idea because there is no ATM fee.
But there is no warning if you overdraw your account and you may incur an overdraft fee. Merchants who impose a hold on your checking account for up to three days to ensure funds are available can wreak havoc on your checking account.
Overdraft Protection Program. Overdraft protection will debit a savings account, another checking account at the bank, line of credit or even a credit card for overdrafts and automatically transfer money to your checking account. The bank may charge a fee for this service, typically $5 or $10, but it is a lot cheaper than paying an overdraft fee which can range from $25 to $39.
Decline All Overdrafts. If you are not enrolled in your bank’s overdraft protection program, the bank may still pay for check, ATM, debit and electronic transactions but you will be charged an overdraft fee. Make sure you have opted out of the bank’s automatic overdraft protection policy. This is different from the Overdraft Protection Program where another one of your account is linked to your checking account and money is transferred to cover overdrafts.
Do not sign onto the automatic overdraft policy at your bank and make sure they know to decline all overdrafts. Otherwise the bank may pay all of your transactions when your account is overdrawn and charge you an overdraft fee for each transaction, instead of just declining any transaction when there are not sufficient funds in the account.
If your bank knows to decline all transactions, they will only authorize or pay a debit card purchase, ATM withdrawal, check, online bill pay and other electronic payments when there’s enough money available in your account or in your linked Overdraft Protection account at the time of transaction. Banks are currently required to provide full disclosure of their overdraft policies and fees, and are obligated to obtain customer approval for enrollment in the overdraft protection policy option.
3. Make a Stink
Banking customers who challenge questionable fees often find banks are willing to waive fees for good customers or even new customers. Be polite and professional but still make a stink and get your point across. If your challenge does not go anywhere with the representative, ask for a supervisor. From the supervisor ask for someone in customer relations. It makes a difference when you speak up.
4. No Overdraft fee Bank
The Capital One 360 Checking Account has no overdraft fees along with no ATM surcharge and no monthly fee. It is a high yield interest checking account. The reason Capital One 360 has no overdraft fees is that the 360 Checking Account comes with an overdraft line of credit which allows customers to write checks or use a debit card for more than the account balance and pay back the overage with interest, over a period of time. The checking account is great, especially if you are tired of monthly fees.