Hidden fees to look out for and avoid
With the holiday season (read: spending season) approaching, wouldn’t it be nice to uncover some extra money you didn’t know you had? Well, voilà! If you stop paying unnecessary hidden fees—the silent-yet-insidious service costs charged by banks and other companies—you could spend that money on presents, travel expenses, or a new winter coat.
So, let’s all renew our vows not to pay hidden fees. Repeat after me: I promise never to pay…
At 3 bucks a pop, using another bank’s conveniently-located ATM is actually pretty inconvenient—especially since doing that twice a week will cost you $312/year. Choose a bank whose ATMs fall on your life’s beaten path. And while you’re at it, limit cash withdrawals to once a week: Having a pre-determined and limited amount of cash on hand is a great way to control spending. Don’t cut out ATM visits altogether, though. Research shows that you may spend less if you pay with paper instead of plastic.
You already know that banks can’t enroll you in costly overdraft protection plans without your permission, but watch out. The Center for Responsible Lending warns that many banks are using “aggressive, deceptive marketing campaigns” to trick people into signing up. For example, some banks aren’t explaining low-cost ways to avoid being declined at the cashier, like linking your debit card to your savings account or a line of credit.
Some people claim free checking is a goner thanks to the financial reform bill, but Bankrate.com offers a search engine to help you find free checking accounts in your area or online. According to Bankrate’s 2010 Checking Study, 65% of non-interest checking accounts come without monthly fees or minimum balance requirements—that’s down from 76% in 2009, but still good odds.
Peak travel surcharges
The airline industry’s latest method for garnering extra cash is through “surcharges”—fees slapped onto ticket prices for the luxury of flying on peak travel dates. Use the handy chart at FareCompare.com to find out when fees are lowest.
Everyone knows I’m the loudest cheerleader for 401(k)s—but they aren’t free, and 8 in 10 people don’t know how much their retirement accounts are costing them, according to a survey by AARP. Here’s the deal: Within your 401(k) you choose which funds to invest in, and these funds come with fees. Read the prospectus on each fund (usually available online) to compare fees, and ask your plan’s administrator if you need help. If you find out you’re not paying the lowest fees, consider switching your investments to index funds or exchange-traded funds offered by your 401(k) plan, which tend to have the lowest expense ratios (but make sure you maintain a risk level you’re comfortable with). This should get easier in late 2011, when the Department of Labor’s new rules on 401(k) fee transparency take effect.
What other fees do you think you could avoid?