Nickel and Dimed: What To Do When Banks Jack Up Our Fees

NEW YORK (MainStreet) — High banking fees still vex financial consumers, and on several different fronts.

Take overdraft fees, which were supposed to be more or less clarified and suppressed as a result of Dodd-Frank financial reforms back in 2009 and 2010. Years later, banking consumers still don't have a decent grip on them.

"Many consumers still express confusion and disapproval about bank overdraft practices and the rules surrounding them," the Pew Trusts say in a 2014 report. "Despite federal requirements that consumers must agree to debit card overdraft coverage before any fees are charged or services are provided, Pew's survey finds that more than half of those who incurred a debit card overdraft penalty fee do not believe they ever opted in to the service."

According to Pew, 80% of bank consumers who overdrafted — who last paid $69 on average for an overdraft — feel the charges should be better regulated.

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Then there are bank fees that affect primarily poorer consumers who can't always afford to meet bank account minimum balances, triggering fees when those balances are not met. "Millions of Americans, looking for a place to safely deposit their hard-earned dollars and a means to pay their bills, get hit every month with checking account fees they cannot avoid," says Consumers Union, a Washington, D.C., consumer advocacy group. "And those fees are going up, as banks have increased checking account charges unless high minimum balances are met — balances that are out of reach for many American families."

The group reports that 48% of American households hold a checking account balance of less than $1,000 — a popular threshold before banks start charging fees for low balances. Those fees are a big part of the total cost of a checking account every year — $218, according to Consumers Union.

To alleviate the potential cash-draining damage of high bank fees, consumers need to be proactive:

  • Review your bank account paperwork to ensure you know the exact potential dollar amount of any fees you might be paying.
  • Check with your bank to see if there are lower-cost product or service options that reduce your odds of incurring a fee. Banks don't always advertise these services, but they are obligated by law to let you know if such service when asked.
  • Take an hour and have a bank representative review your account. Often, "designing" the best account for your income levels and service needs can keep fees to a minimum.
Read More: Younger Americans Are Using Bank Services Most Banks Don't Have
  • Don't go "hard line." Chances are, you're going to pay some fees for bank services. But paying less than $5 a month for complete 24/7 access to your banking records is a good deal. It's when those fees go north of $10 per month that might call for intervention — although everyone has their own 'trigger" level.
  • Aim for direct deposit. Most banks want you using direct deposit, as it saves them money on personnel. Many checking accounts become "fee-free" when you opt for direct deposit, and it's certainly worth a look.

Also, use ATMs from your own bank, as non-bank machines can really drive up bank fees, says Ram Palaniappan, founder of ActiveHours, an online work payment service. "Many banks charge … penalties for using non-affiliated ATMs," Palaniappan says. "Ignoring the fine print on your account can mean big money out of your pockets — and into your bank's."

Bundling works too. The more accounts you have set up at your bank, the fewer fees you'll incur (such as a checking account and a savings account). Signing up for text or email alerts can also give you a heads-up on fees, including when your account balance is falling below the fee-triggering levels.

By and large, avoiding bank fees is up to you. Check with your bank, review your account and take the steps needed to cut them on a regular basis.

— By Brian O'Connell for MainStreet

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