While fees might be necessary (businesses have to be profitable, after all), consumers are savvy enough to realize how ridiculous some of the fees really are. Unfortunately, they don’t always make the effort to find the loopholes to avoid paying them.
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With new legislation that has changed the rules on how credit card companies and banks can bill fees, consumers are still not totally protected. In fact, many companies have just become more creative about how to tack on extra cash to increase their profits.
So, in order to be an informed consumer you should consider what kind of fees you can avoid paying with a little effort. The first step is the most important: you need to understand what fees you are actually paying by reading every line of every bill you pay and every contract/service agreement you sign.
Here are some of those fees and how to avoid them:
1. Account Fees
We know that banks aren’t very generous when it comes to paying us interest for our business but they have become downright miserly when they began cutting out the free checking account options on their list of services. It won’t take long for most of the major banks to drop free accounts altogether and impart a fee of $15 or more for checking accounts. Some banks have also changed the requirements for the minimum amount of balance you must maintain to get a checking account for a discounted fee or for free.
How To Avoid Paying It: Thanks to Internet competition from online banks and the willingness to please local banks and credit unions, banking customers have options if they do not want to pay the fee for opening or keeping a checking account. Shop around the neighborhood and the Internet and check out your current bank’s competition. If you are happy with your bank and have been a long-time customer, ask them if they can cut you a deal.
2. Transfer Fees for Overdraft Protection
Many banking costumers will connect a credit card or savings account to their checking account so that in the event of a transaction that causes the account to become overdrawn, monies can be transferred from one account to another. Preventing "non-sufficient funds" charges can save a customer up to $35 for every bounced transaction. Banks lose profits when they can’t charge the outrageous fees for overdrawing accounts so they got wise and started tacking on fees for the act of automatically transferring monies from one account to another. These fees range from $10 to $20 per transaction and while they are less than most overdraft fees, they still short-change banking customers.
How to Avoid Paying It: Check with your bank about signing up for automatic notifications via email or text alerts that tell you when your bank account falls below a certain amount. You can also utilize the services of Mint.com. The more obvious action is to make sure your checkbook is balanced frequently and that you aren’t spending more money than you have available.
3. Rewards Reinstatement Fees
In light of the recent credit card changes, many card companies are finding innovative ways to get some cash that doesn’t interfere with the new CARD Act rules. One such measure involves punishing rewards credit card customers for paying their bill late. If a payment is made passed the due date, some credit card companies will remove any points you have earned during the billing cycle but will be happy to give them back to you for an additional fee. (Capital One and some other card companies won’t give them back at all.) The reinstatement fee can be anywhere from $15 to $30 or more depending on the company.
How To Avoid Paying It: Quite simply, the only way to ensure your points are protected is to pay your bill on time. You can set up automated payments in advance to make sure your bill is handled on time each month or you can just pay close attention to writing your checks and mailing them properly each month. If you already lost your points for late payments, figure out if the cost of getting them back is even worth this crazy fee.
4. Luggage on a Plane Fees
Airlines are another industry trying to make up profits. Some carriers are charging for everything these days, including rental fees for pillows or headphones. While not all have gone overboard on their fees, the majority of carriers do charge for luggage. The cost on domestic flights ranges from $15 to $45 for the first bag and $25 to $35 each for additional bags. Only Southwest Airlines and JetBlue do not charge for the initial checked bag.
How to Avoid Paying It: If you must fly on an airline that charges for bags, pack light. Check in with any rewards clubs or frequent flier rewards representatives to see if you qualify for discounted luggage fees or maybe even a waiver of the fee. You may also want to check in with the airline’s website to see if it’s cheaper to pay online for the baggage fee than it would be to pay at the airport. Another option for longer trips is mailing your items to your destination through the postal service. The cost for postage might be cheaper than the extra baggage fees.
Pinyo is the owner of Moolanomy Personal Finance Blog, which covers a wide range of personal finance and investing topics, with features that include reviews, comparison guides, and Q&A sections.