Sorry about my 2 week hiatus. A couple of real life items imposed themselves on my blog life. Although several of these things were noble and/or quite understandable, I have to admit the last week was mostly due to my preoccupation with a computer game :O! This particular blog I intended to be just a couple of paragraphs within another blog I'm writing called: Living Below Your Means. However, it grew too big and I wanted to post something, so here it is!
Fee$!
1. Introduction
2. BANKS!
3. CELL PHONE$!
4. CREDIT CARD$!
5. TAXE$!
6. Summary
1. Introduction
This is a short entry just on how to avoid fees. In general, any financial interaction can incur a fee. Unlike the other bits of the transaction (such as paying for your groceries), the fee is not payment for a good or service. Instead a fee is a penalty levied upon you because you didn't play by the other party's rules.
Any organization can charge a fee - government or businesses and most of them will (try paying your taxes late sometime and see how understanding and compassionate our government really is!).
However, if you know what to look for, most fees can be avoided. Each time you avoid paying a fee, it's like putting cash right back into your pocket.
So let me discuss four institutions that commonly charge us ordinary citizens fees:
Back to the top
2. BANKS!
Instead of being a place to safely hold your money, it seems that banks have turned into a devious mechanism to squeeze every last dime out of you. Banks and their various services levy all sorts of fees.
1) ATM Fees -
Shop around! It took me months to find an ATM with the lowest fee ($0.00!!) but I found one for my bank. Plus if you use your ATM card as a debit card, you can pull out some cash during that transaction and not pay a fee. The fees I've seen are $2.00 or more per transaction. If you make 10 cash withdraws in a month that could add up to $20.00 per month or $240.00 per year - just to withdraw your own money.
Plus president Obama has suggested a new tax of 1% of every financial transaction including depositing and withdrawing your money from your bank account!
2) Check writing fees -
Many checking accounts levy a fee when your write more than an allotted number of checks. For my account, this is 6 checks. However, the checks I issue out of my on-line banking system are not counted against this total. So I pay nearly every bill out of my online system. The fee my bank charges is $0.60 per check over 6 in a month.
3) Checking account fees -
Many banks simply charge their customers an annual fee for the privilege of getting to hold-on to their money in the form of a checking account. If your bank imposes such a fee, I'd say skip the bank and get an account elsewhere. My credit union doesn't charge me any fee at all for my checking account.
4) Savings account fees -
I have seen accounts that charge a fee for their savings account too. The fee will typically be waived if you have your paycheck direct deposited into their account -OR- you maintain a minimum balance. When charged, this fee will typically be a monthly fee. I also don't put up with this fee, I shopped around for a bank with a savings account that did not impose the fee.
5) Withdraw fees -
Banks are introducing all sorts of new fees. This fee is charged for going over a certain number of transactions in a month. Often the transaction counted is withdraws. You can find a bank that doesn't charge this fee for their accounts.
6) Teller fees -
Some banks charge you to use their teller services. In a twisted way this makes sense - it costs the bank a lot more to man the teller window than to keep the ATM running. But ironically a bank likely to charge this fee will also charge you to use their ATM. If you never or only rarely use the teller services, then this one might be OK.
7) Not maintaining minimum balance fees -
This depends upon the type of account you get. Some accounts (especially savings accounts) require a minimum balance. If you do not have the minimum balance, the bank will charge you a DAILY fee as long as the account is below that minimum. Trust me, this stupid trick can drain your account very fast if you don't pay close attention. If you're not planning on keeping a large balance, then you need to ensure that the bank doesn't charge this fee.
8) Non-Sufficient Funds fees -
If you withdraw too much on your ATM card or you write a check for more than you have (which is a federal felony), banks charge you a hefty fine. How much they charge you depends on the bank but probably in the $20 - $50 per occurrence range. Many banks do a very interesting thing when processing your deposits and withdraws every morning. They first process all debits - starting with the largest debit. Then after processing all debits, they apply your deposits. What happens if you have 10 x $10 withdraws, 1 $200 withdraw, a $1000 deposit and only $150 in your account? Well -ALL- of your checks bounce and they charge the NSF fee for each and every one of those checks! 11 checks times $30 = $330 then add the $300 the checks were for and you'll only have about $520 left in your account after one of these fiascoes!
On top of the bank's NSF fees, every store where you bounced the check will also levy an NSF fee. The NSF fees from both sides could easily consume $600 - $700 for this one incident. To add insult to injury, this sort of occurrence could have severe negative consequences to your credit score.
And it's illegal.
9) Out of network ATM fees -
Some ATMs do not belong to your bank's network. In that case, the bank which owns the ATM may charge you extra - but sometimes your own bank charges you extra too!
10) Banking summary -
So what can you do about all of this?
Shop around. I'm using a credit union and not a bank. Look for ATM machines with low or no fees.
Pick the right account type. Knowing how you use your bank will help you select the account that is least likely to incur penalties.
Pay attention. Look at your bank statements. If you have incurred a fee, call the bank and ask them why. Heck, while your at it -politely- ask them to remove it (they usually say "no" but will sometimes overturn them - so it's worth your time to ask). If you only get 6 ATM withdraws in a month, then only use 6! This isn't rocket science < insert shameless plug of my blog > but if you are interested in rocket science, review my other thread on the "Case for Space" :) ). < / insert shameless plug of my blog >
Once you understand why you were charge a fee, you can avoid similar circumstance. I have gotten so that I am almost never charge *any* bank fees. This probably saves me more than $100/month.
Back to the top
3. CELL PHONE$!
Cell phone companies are counting on the fact that most of their users are teenagers and young adults who will not read the details of their plan. They are counting on the fact that these users will exceed their plans limits - allowing the company to charge exorbitant rates for the overages.
*You must read your plan's details and monitor your own usage.*
In some cases, these fees can accumulate to a sum even larger than the base fee - hundreds of dollars per month.
1) Too many texts -
This has been a problem in my house. More than once I have cut out texting services entirely from the plan to stop the overages. In my last cell phone plan purchase, I got the unlimited texting for the plan (it wasn't available in my previous plans). If you do not have unlimited texting, then you must using texting services sparingly. In months we have gone over, we have had to pay $35 to more than $100 for the texting overages. What I have done to stop the overages in the past is to shut-off texting service for the offender's phone.
2) Downloading too much data -
My family now has multiple cell phones as well as a mobile broadband card (it's a modem that works on cell phone signals). Recently my work disabled my mobile broadband card because I had a "gone over" my data limit. It turns out they had accidentally put me on the 5 GB of data per month instead of the unlimited plan. Well I had used 35 GB in just 14 days!
It turns out that all of the new phones used by my family are broadband compatible - meaning they *could* download email and pictures as well as browse the internet from their phones. Only I never bought the broadband plan, because it's so pricy. If we do use broadband, Verizon plans to charge us $2.00 / MB. So if my kids used 35 GB of data I'd owe $70,000!
It is REALLY important that you do not exceed the usage limits of your cell phone plan.
3) Using too many "anytime" minutes -
Most plans do not charge for calls after 7 pm or made during the weekend. However, when you make calls during business hours, these count to your plan's anytime minutes. Use your phone sparingly during work hours. Typically overages cost only $0.10 cents per minute, however, with many cell phones on the plan and teenagers in the house, the number of minutes can quickly stack up. If you are a parent, look through your cell phone bills to find who is exceeding your plan's limits. What I have done for repeat offenders is to cut off services for the offender.
4) Overseas calls -
This is probably not an issue for most cell phone users. However, if you're planning on traveling, you need to check your plan. Find out if your phone works where you'll be going. Some networks charge exorbitant fees for traveling out of the country. Fees so high, it would make more sense to get a different plan for the duration of your travel.
5) Calls outside of your plan
Some cell phone plans still charge for roaming (using cell phone towers not owned by your plan). Roaming can be very expense (dollars per minute). When your phone is roaming, do not make or take a call unless it is an emergency.
In general the only thing you can do is monitor your usage and do not go over your plan limits.
Back to the top
4. CREDIT CARD$!
Credit card companies notoriously charge fees for late payments, over overdrawing your account, being late, just for holding their card, etc. Sometimes credit card company dramatically increases your interest rates (they tend to determine which hurts you the most and use that penalty.
1) Late payments -
My best advice is to ensure your payments are on time and you never exceed your credit limit.
2) Exceeding your credit line -
If you plan to go on a trip and need your limit increased, call them and request it. *Usually* they're willing to let you take on a greater loan.
3) Annual fees -
NEVER take a credit card with an annual fee. There are a huge number out there that don't charge any fee.
In order to avoid these fees or at the very least minimize them you must read and understand the fine print of the contracts that you sign. Whether the contract covers your bank account, phone, or credit card; you must understand how they intend to collect money from you and behave in a manner that avoids those fees.
Back to the top
5. TAXE$!
I'm not going to go into too much detail but let me just state that if you think credit card companies or banks are out to screw you over - they are small potatoes compared to our governments.
Property taxes - if you are late, regardless of reason (including natural disasters, deaths in the family, house fires, etc.) local governments typically impose a 10% penalty for a late payment of your property taxes.
Income taxes - if you pay late, a fine is immediately imposed, plus a high interest rate is charged on both the fee and any money that you owe. This can turn small under-payments into large sums of money. Furthermore, if you fail to pay, the IRS can and will throw you in jail.
If the IRS thinks you owe more than you have paid and you dispute their conclusions, you have the burden of proof. The IRS gets a special court system just to try income tax cases. The IRS is permitted to harass US citizens in ways that are forbidden by law for collection agencies to use. The IRS is also allowed to garnish your wages (take your paycheck from you) and throw you in jail. Any income taxes that you owe are not forgiven when filing for bankruptcy.
Furthermore, if you underpay by more than a certain amount throughout the year (e.g. because of too little withholding) you will have to pay a penalty plus interest for the time they didn't get to hold your money. If you over-pay? You only get the amount you over-paid.
My suggestions for the fees imposed by our government - is avoid them. Pay your taxes on-time. Ensure your withholding is sufficient to not have to pay a penalty.
If the government owes you money, file your taxes as soon as you get the necessary documentation. If you owe the government, delay your filing until the first of April or so. Change your withholding exemptions to try withhold either the precise amount you'll owe this year or if you don't know how much that is shoot for the same amount you owed last year.
Back to the top
6. Summary
Fees have become an essential source of income for many government and corporate organizations. The main trick to avoiding fees is to understand why they will be imposed and then do not perform the activity that will incur the fee. The fees imposed on most people add up to a lot of money every year - that's money we can't spend on other things we might need, like heating!
If only I could convince my kids to text less!
Back to the top
Proceed to the next finance blog, (not finished yet).
Return to the previous finance blog, Manage your credit.
Fee$!
1. Introduction
2. BANKS!
3. CELL PHONE$!
4. CREDIT CARD$!
5. TAXE$!
6. Summary
1. Introduction
This is a short entry just on how to avoid fees. In general, any financial interaction can incur a fee. Unlike the other bits of the transaction (such as paying for your groceries), the fee is not payment for a good or service. Instead a fee is a penalty levied upon you because you didn't play by the other party's rules.
Any organization can charge a fee - government or businesses and most of them will (try paying your taxes late sometime and see how understanding and compassionate our government really is!).
However, if you know what to look for, most fees can be avoided. Each time you avoid paying a fee, it's like putting cash right back into your pocket.
So let me discuss four institutions that commonly charge us ordinary citizens fees:
Back to the top
2. BANKS!
Instead of being a place to safely hold your money, it seems that banks have turned into a devious mechanism to squeeze every last dime out of you. Banks and their various services levy all sorts of fees.
1) ATM Fees -
Shop around! It took me months to find an ATM with the lowest fee ($0.00!!) but I found one for my bank. Plus if you use your ATM card as a debit card, you can pull out some cash during that transaction and not pay a fee. The fees I've seen are $2.00 or more per transaction. If you make 10 cash withdraws in a month that could add up to $20.00 per month or $240.00 per year - just to withdraw your own money.
Plus president Obama has suggested a new tax of 1% of every financial transaction including depositing and withdrawing your money from your bank account!
2) Check writing fees -
Many checking accounts levy a fee when your write more than an allotted number of checks. For my account, this is 6 checks. However, the checks I issue out of my on-line banking system are not counted against this total. So I pay nearly every bill out of my online system. The fee my bank charges is $0.60 per check over 6 in a month.
3) Checking account fees -
Many banks simply charge their customers an annual fee for the privilege of getting to hold-on to their money in the form of a checking account. If your bank imposes such a fee, I'd say skip the bank and get an account elsewhere. My credit union doesn't charge me any fee at all for my checking account.
4) Savings account fees -
I have seen accounts that charge a fee for their savings account too. The fee will typically be waived if you have your paycheck direct deposited into their account -OR- you maintain a minimum balance. When charged, this fee will typically be a monthly fee. I also don't put up with this fee, I shopped around for a bank with a savings account that did not impose the fee.
5) Withdraw fees -
Banks are introducing all sorts of new fees. This fee is charged for going over a certain number of transactions in a month. Often the transaction counted is withdraws. You can find a bank that doesn't charge this fee for their accounts.
6) Teller fees -
Some banks charge you to use their teller services. In a twisted way this makes sense - it costs the bank a lot more to man the teller window than to keep the ATM running. But ironically a bank likely to charge this fee will also charge you to use their ATM. If you never or only rarely use the teller services, then this one might be OK.
7) Not maintaining minimum balance fees -
This depends upon the type of account you get. Some accounts (especially savings accounts) require a minimum balance. If you do not have the minimum balance, the bank will charge you a DAILY fee as long as the account is below that minimum. Trust me, this stupid trick can drain your account very fast if you don't pay close attention. If you're not planning on keeping a large balance, then you need to ensure that the bank doesn't charge this fee.
8) Non-Sufficient Funds fees -
If you withdraw too much on your ATM card or you write a check for more than you have (which is a federal felony), banks charge you a hefty fine. How much they charge you depends on the bank but probably in the $20 - $50 per occurrence range. Many banks do a very interesting thing when processing your deposits and withdraws every morning. They first process all debits - starting with the largest debit. Then after processing all debits, they apply your deposits. What happens if you have 10 x $10 withdraws, 1 $200 withdraw, a $1000 deposit and only $150 in your account? Well -ALL- of your checks bounce and they charge the NSF fee for each and every one of those checks! 11 checks times $30 = $330 then add the $300 the checks were for and you'll only have about $520 left in your account after one of these fiascoes!
On top of the bank's NSF fees, every store where you bounced the check will also levy an NSF fee. The NSF fees from both sides could easily consume $600 - $700 for this one incident. To add insult to injury, this sort of occurrence could have severe negative consequences to your credit score.
And it's illegal.
9) Out of network ATM fees -
Some ATMs do not belong to your bank's network. In that case, the bank which owns the ATM may charge you extra - but sometimes your own bank charges you extra too!
10) Banking summary -
So what can you do about all of this?
Shop around. I'm using a credit union and not a bank. Look for ATM machines with low or no fees.
Pick the right account type. Knowing how you use your bank will help you select the account that is least likely to incur penalties.
Pay attention. Look at your bank statements. If you have incurred a fee, call the bank and ask them why. Heck, while your at it -politely- ask them to remove it (they usually say "no" but will sometimes overturn them - so it's worth your time to ask). If you only get 6 ATM withdraws in a month, then only use 6! This isn't rocket science < insert shameless plug of my blog > but if you are interested in rocket science, review my other thread on the "Case for Space" :) ). < / insert shameless plug of my blog >
Once you understand why you were charge a fee, you can avoid similar circumstance. I have gotten so that I am almost never charge *any* bank fees. This probably saves me more than $100/month.
Back to the top
3. CELL PHONE$!
Cell phone companies are counting on the fact that most of their users are teenagers and young adults who will not read the details of their plan. They are counting on the fact that these users will exceed their plans limits - allowing the company to charge exorbitant rates for the overages.
*You must read your plan's details and monitor your own usage.*
In some cases, these fees can accumulate to a sum even larger than the base fee - hundreds of dollars per month.
1) Too many texts -
This has been a problem in my house. More than once I have cut out texting services entirely from the plan to stop the overages. In my last cell phone plan purchase, I got the unlimited texting for the plan (it wasn't available in my previous plans). If you do not have unlimited texting, then you must using texting services sparingly. In months we have gone over, we have had to pay $35 to more than $100 for the texting overages. What I have done to stop the overages in the past is to shut-off texting service for the offender's phone.
2) Downloading too much data -
My family now has multiple cell phones as well as a mobile broadband card (it's a modem that works on cell phone signals). Recently my work disabled my mobile broadband card because I had a "gone over" my data limit. It turns out they had accidentally put me on the 5 GB of data per month instead of the unlimited plan. Well I had used 35 GB in just 14 days!
It turns out that all of the new phones used by my family are broadband compatible - meaning they *could* download email and pictures as well as browse the internet from their phones. Only I never bought the broadband plan, because it's so pricy. If we do use broadband, Verizon plans to charge us $2.00 / MB. So if my kids used 35 GB of data I'd owe $70,000!
It is REALLY important that you do not exceed the usage limits of your cell phone plan.
3) Using too many "anytime" minutes -
Most plans do not charge for calls after 7 pm or made during the weekend. However, when you make calls during business hours, these count to your plan's anytime minutes. Use your phone sparingly during work hours. Typically overages cost only $0.10 cents per minute, however, with many cell phones on the plan and teenagers in the house, the number of minutes can quickly stack up. If you are a parent, look through your cell phone bills to find who is exceeding your plan's limits. What I have done for repeat offenders is to cut off services for the offender.
4) Overseas calls -
This is probably not an issue for most cell phone users. However, if you're planning on traveling, you need to check your plan. Find out if your phone works where you'll be going. Some networks charge exorbitant fees for traveling out of the country. Fees so high, it would make more sense to get a different plan for the duration of your travel.
5) Calls outside of your plan
Some cell phone plans still charge for roaming (using cell phone towers not owned by your plan). Roaming can be very expense (dollars per minute). When your phone is roaming, do not make or take a call unless it is an emergency.
In general the only thing you can do is monitor your usage and do not go over your plan limits.
Back to the top
4. CREDIT CARD$!
Credit card companies notoriously charge fees for late payments, over overdrawing your account, being late, just for holding their card, etc. Sometimes credit card company dramatically increases your interest rates (they tend to determine which hurts you the most and use that penalty.
1) Late payments -
My best advice is to ensure your payments are on time and you never exceed your credit limit.
2) Exceeding your credit line -
If you plan to go on a trip and need your limit increased, call them and request it. *Usually* they're willing to let you take on a greater loan.
3) Annual fees -
NEVER take a credit card with an annual fee. There are a huge number out there that don't charge any fee.
In order to avoid these fees or at the very least minimize them you must read and understand the fine print of the contracts that you sign. Whether the contract covers your bank account, phone, or credit card; you must understand how they intend to collect money from you and behave in a manner that avoids those fees.
Back to the top
5. TAXE$!
I'm not going to go into too much detail but let me just state that if you think credit card companies or banks are out to screw you over - they are small potatoes compared to our governments.
Property taxes - if you are late, regardless of reason (including natural disasters, deaths in the family, house fires, etc.) local governments typically impose a 10% penalty for a late payment of your property taxes.
Income taxes - if you pay late, a fine is immediately imposed, plus a high interest rate is charged on both the fee and any money that you owe. This can turn small under-payments into large sums of money. Furthermore, if you fail to pay, the IRS can and will throw you in jail.
If the IRS thinks you owe more than you have paid and you dispute their conclusions, you have the burden of proof. The IRS gets a special court system just to try income tax cases. The IRS is permitted to harass US citizens in ways that are forbidden by law for collection agencies to use. The IRS is also allowed to garnish your wages (take your paycheck from you) and throw you in jail. Any income taxes that you owe are not forgiven when filing for bankruptcy.
Furthermore, if you underpay by more than a certain amount throughout the year (e.g. because of too little withholding) you will have to pay a penalty plus interest for the time they didn't get to hold your money. If you over-pay? You only get the amount you over-paid.
My suggestions for the fees imposed by our government - is avoid them. Pay your taxes on-time. Ensure your withholding is sufficient to not have to pay a penalty.
If the government owes you money, file your taxes as soon as you get the necessary documentation. If you owe the government, delay your filing until the first of April or so. Change your withholding exemptions to try withhold either the precise amount you'll owe this year or if you don't know how much that is shoot for the same amount you owed last year.
Back to the top
6. Summary
Fees have become an essential source of income for many government and corporate organizations. The main trick to avoiding fees is to understand why they will be imposed and then do not perform the activity that will incur the fee. The fees imposed on most people add up to a lot of money every year - that's money we can't spend on other things we might need, like heating!
If only I could convince my kids to text less!
Back to the top
Proceed to the next finance blog, (not finished yet).
Return to the previous finance blog, Manage your credit.
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