Almost everyone has a bank account. It is one of the most pervasive financial influences in our lives. Banks know how much money we make, what political parties we contribute to, and by looking at ATM transactions, they even know where we were last Saturday night at 2 a.m.
As long as everything goes well, few of us question that we've made the right choice in financial institutions. It's when something goes wrong that we find out the worth of our relationship. So what can go "wrong"? A lost deposit, a bounced check, or an unanswered question about a bond coupon can all send us looking for a new bank. But few things yank our chains more than all those fees.
A recent survey of financial institutions across the nation came up with over 400 "services" for which fees are charged. From $3 to talk to a teller in person to $5 for getting money from an ATM from an out-of-state bank, it's the little charges that are the most onerous to consumers. A few dollars here, a few dollars there, who cares? Fools do. Add it up over the course of a year and the average consumer pays over $600 in various banking fees!
What makes the ATM charges even harder to swallow is knowing that the technological advances in banking have meant tremendously greater earnings for banks in the last three years. Customers using mainly ATMs and banking online require few tellers and branches to service those consumers. Fewer buildings and bodies equate to lower expenses for your bank.
So how can you make sure that some of those savings are being passed on to you? Be Foolish! Know what you want, what you need, and beware of strangers offering interest-bearing checking accounts. Here are some guidelines for keeping your banking costs under control.
--Understand what kind of service you need and don't pay for more. Checking accounts don't make money for a bank. It's all of those other services that they hope you will buy that really add to their bottom line. Credit cards, mortgages, and mutual funds are their bread and butter. Just because your checking account is with one bank doesn't mean that all your financial transactions should be done there as well. An employee at a local Maryland bank (who wishes to remain nameless) says that her job is to sell you as many services as possible, regardless of whether you need them. She says that none of her training covered how to help customers find services that match their needs.
--Look at old monthly statements and map your spending habits. Do you use an ATM every day? Are you prone to bouncing checks? Do you distrust technology and need to watch a person log in your deposit? All of these are clues as to which bank is right for you. Being the techno-nerd that I am, my bank is the one with the largest number of free ATMs in the metro area -- not the one closest to my home.
--Understand the differences between accounts. In general, checking accounts fall into three basic categories and one trick category:
--An account with low fees, doesn't require a minimum balance, and doesn't pay interest.
--An account that earns interest, but charges higher fees if your minimum balance isn't maintained.
--A special account with no or low fees for low-income consumers. Seven states require that banks offer these types of accounts to senior citizens.
--And then, just to make you crazy, banks also offer "Money Market Checking" accounts, which aren't really checking accounts at all. These accounts usually pay a low interest rate between 2% to 4% and limit the number of checks you can write each month to three.
--Don't sweat the interest. These days, interest rates on checking accounts are so low that it's hardly worth the worry. Your bank is likely to pay anywhere from 1.5% to 4% -- not enough to offset the inconvenience of maintaining the high balance required by most interest-bearing checking accounts. Also, if your balance dips below the minimum required (oftentimes as much as $1,000), you'll get whacked with a monthly fee of $7 to $10. Leave as little as possible in your checking account and put the rest of your money in other low-risk investments.
--Watch out for the Trojan horse. Many banks offer gifts like a free safe deposit box if you maintain a high balance in a savings account that pays low interest. When I asked my "source" about opening this type of account at her bank she said, "Oh, don't worry about it. That would be a stupid thing to get." When I asked if her bank opened many such accounts, she said, "All the time."
--Be your own best advocate. Sometimes the squeaky wheel gets the grease. Did you bounce a check? Plead your case to the branch manager. She has the power to reverse the fee. Think you pay too much for your credit card? Call the service center and tell them you're looking for another bank with a lower fee. Surprisingly, this actually works a lot of the time and they will often offer you a better deal.
--Don't forget to look at smaller banks and credit unions. With the increasing consolidation of the industry, many large banks lack the personal touch. Smaller institutions are stepping up to the plate by offering more personalized services. Because you actually know your banker by his first name, they're hoping you'll do more business with them. If that personal touch is important to you, don't forget to investigate the mom and pop alternatives.
--Trudy Bowen (TMF [email protected])
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