Batten down the hatches: Bank fees have been rising for a number of years, but the "perfect storm" of a weak economy, troubled financial markets and low interest-rate yields produced the 2011 hurricane.

Even though Bank of America canceled its planned $5-a-month debit card fee as consumers roared their objections and competing banks backed away from similar plans, this did not signal an end to rising bank fees.

It is time to be a smart consumer and to view bank fees as a drawback to your overall investment strategy. Oversized fees can hurt your personal wealth just as much as a sputtering mutual fund can.

Consumers who have already been pushed to the limit by the depressed state of the value of their homes, stock holdings and job security are definitely not going to calm down.

Keep the following in mind:

You can still find some credit unions, community banks and online banks that offer free checking and lower fees, though this does require doing some homework.

-- You should carefully read every notice that you receive from your bank. If you find that it has initiated or is about to initiate a fee that you're unhappy with, contact it to see if there's any way that fee can be avoided. In some cases, banks may waive a fee if you have a large enough amount in your checking account or have other relationships with it.

-- You should be a squeaky wheel. Banks watched and waited to see how Bank of America's business was being affected by the proposed debit-card fee. Let your bank know that you are watching its fees carefully and that you are simply fed up with rising bank fees.

Since federal law on Oct. 1 reduced the amount that banks can charge merchants to process debit transactions, banks have been trying to make up for the reduced revenue. There are a lot of places they can look.

In addition, bank overdrafts are the focus of a federal requirement that went into effect on July 1, 2010, in which banks must ask their customers permission to charge overdraft fees on debit card purchases and ATM withdrawals. Consumers can "opt in" to allow their bank to overdraw their debit card or ATM account. Those who don't opt in are not allowed to overdraw their accounts. Banks are asking their customers, but they are charging a lot.

A recent survey by the Consumer Federation of America found that bank overdraft fees at the 14 largest banks remain high, ranging from $33 to $37. It also found that two-thirds of the banks add second and multiple fees if consumers do not repay overdrafts promptly. That's a costly result.

"Consumers can shop around for better fees but need to be careful because it is not as easy as going on a bank's website to get its fee listings," advised Jean Ann Fox, director of financial services for Consumer Federation of America in Washington, D.C. "Those fees aren't listed because there's no incentive for a bank to make the information easy to obtain."

The banks are hoping that you look at this as more trouble than it's worth, Fox said. Also, keep in mind that you shouldn't leave a bank only because it has a monthly debit card fee, she added, since you may not want to wind up at a bank with an extremely high minimum checking balance. That's not helping your financial condition either.

"Banks are definitely scrambling around to try to find ways to make up for their lost revenue," said Pamela Banks, senior policy counsel for Consumers Union in Washington, D.C. "So protest and definitely let your bank know your feelings because it is testing to see if its consumers will accept fees. If they do, it knows that they can raise them again down the road."

The motivation behind increased fees is simply their availability, Banks said. Banks are raising fees across the board in every conceivable way they can think of in order to find more money to improve their balance sheets, she said.

New fees by some banks and other banks playing follow-the-leader is the new reality.

"Increases in bank fees have been a continuing trend for at least 15 years, but they kicked into overdrive in the past year due to regulatory changes," said Greg McBride, senior financial analyst at Bankrate.com in North Palm Beach, Fla. "Before reform, everyone that was offering free checking was covered by the revenue stream from overdraft fees on checking and debit-card swipe fees charged to merchants."

Free checking was halted by banks because it lost those other two revenue streams, said McBride. Bank fees have been in line with inflation for over a decade, and the cost of everything is going to increase, he warned. That requires better planning on everyone's part.

This is a year to not only examine bank fees but every fee that can reduce your savings and investment. Pay attention to brokerage account fees, mutual fund fees and credit card terms. Read the small print, open the envelopes and ask good questions. Every little bit can make a difference in a year when investment and savings returns can be either unpredictable or low.

 

 

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Personal Finance - How To Navigate the Bank Fee Storm of 2011

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