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You'd never toss $35 down on the street and walk away, but every time you make a late credit card payment or overdraw your bank account, you could be charged that much or even more.
To keep your charges as low as possible, make sure you understand the circumstances in which fees would be charged. For example, are you limited to a certain number of debit or ATM transactions per month? What’s the charge for using another bank's ATM machine? Are you automatically enrolled in high fee services like courtesy overdraft services? Avoidable service charges could cost hundreds of dollars per year if you're not careful.
Here are some tips to avoid banking fees:
Financial institutions typically offer several checking account plans with different interest rates, fees and minimum balance requirements. When making account choices, be sure to read the fine print about transaction limits and add-on fees in light of how you'll actually be using the account. If the account doesn't match your needs, even a "free" account could be expensive after unexpected fees are added.
Fee-Based Financial Services
You’ve probably seen storefront businesses offering check cashing and quick loans.
These so-called “alternative” financial services typically charge fees rather than interest for their services, but the end result is the same – borrowing money has a cost. The big difference is that the cost from alternative lenders is often much higher than traditional banks and credit unions.
When determining whether or not these services are a good deal, it’s very important to understand how fees translate into equivalent interest rates. Let’s compare a short-term alternative loan to borrowing on a credit card, already one of the most expensive ways most people borrow money.
Say you need to borrow $200 for one month to pay a bill. If your credit card had a 29% interest rate, charging your $200 bill and repaying it in 30 days would result in a maximum interest charge of under $5. But, if you used a fee-based service like an auto title loan or payday-type loan, you could be charged a $30 fee for each $100 borrowed. So if the fee entitled you to one month’s use of $200, the loan cost would be $260 – equivalent to an interest rate of nearly 400%!
When using any financial service that primarily charges fees rather than interest, chances are you're not getting a good deal.