Strategies for Avoiding New Bank Fees
It may be time to revamp your banking relationships.
With financial reform choking off a variety of bank fees and other traditional sources of bank revenue, consumers are likely to see their financial institutions shift costs and service charges to areas unaffected by regulatory reform, said
That means your checking account might cost more, your credit card reward program might provide less and your best bet for borrowing may not be the neighborhood bank.
"The landscape is changing radically," Levin said. "You have to look at this whole thing like a chessboard. You can't watch only one piece and think you're seeing the whole picture."
In an environment where banking wisely can be a strategy game, how do you set yourself up for a win? There are new options to consider these days.
You need a checking account, but do you need a local bank? The answer to that question pivots on whether you bank in person.
If the last time you saw a teller was 1967, you may be the perfect candidate for a "rewards checking" plan, said
What's reward checking? It's a free account with strings. Specifically, you must agree to have your checks directly deposited, use your debit card several times a month and pay your bills online.
If you do that, you earn interest on your checking balance that rivals CD rates, which are about 10 times higher than the typical rate paid on interest-bearing checking accounts.
"It's not a fit for everyone, but for those who like banking electronically, you get paid for doing stuff you're already doing," McBride said. "You can earn 2.5 percent to 3 percent interest on your balance for having direct deposit, getting your statements online and using your debit card 10 times a month. For a lot of people, that's like getting up and tying your shoes in the morning. It's nothing that you wouldn't do anyway."
Connect your accounts
There are two reasons to connect your savings and checking accounts. One involves overdrafts; the other offers a potential for free checking.
By connecting accounts, you can avoid fees for careless errors, such as when you overspend by
If you connect your checking account to a credit card or savings account, you'll pay a fee to transfer money from savings to checking when necessary, but it will be a lot less than the standard overdraft charge for so-called automatic overdraft protection.
Banks must get you to "opt in" to this costly overdraft protection under new rules. Don't. Connecting your checking and savings accounts gives you the same protection at a fraction of the cost.
The other benefit of connecting accounts is to vault over minimum balance requirements that determine whether you can get your checking account free. In the new environment, it's likely that minimum-balance requirements will rise, Levin said.
That may make it smart to put more accounts under one roof. In many cases, banks will look at your entire "relationship" -- mortgage, checking, savings and credit cards -- to determine whether to charge a fee for any given service.
And it's common to aggregate the deposits you have in savings, checking and certificates of deposit to figure whether you meet minimum balance requirements. Banks aren't paying great rates on checking or savings accounts. But if having
If you're a good credit risk, now is the time to shop for a rewards credit card, McBride said.
Half a dozen banks have lengthened the duration of low-rate "introductory" offers, allowing customers to enjoy 12 to 18 months of cheap or free credit, according to
Several issuers have also revamped their rewards programs. These new programs can help careful users get more points for their purchases, but they also give banks new and potentially valuable information about you.
"Credit card companies have always had a lot of information about what you're buying," said
Airline reward cards, the traditional favorite, are looking less attractive these days, McBride said. The reason: The cards provide as many "points" as before, but the airlines are making those points more difficult to redeem.
"If you are a good credit risk, now is the time to shop around," McBride said. "There's a lot of innovation going on in this space."
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Personal Finance - Strategies for Avoiding New Bank Fees
(c) 2010 Kathy Kristof