The majority of banking and credit card fees are an unnecessary expense that can be avoided. Many people are unaware that the financial choices they make incur fees. By simply taking the time to understand how fees are implemented the majority levied can be avoided. It is a legal requirement for all fees to be specified in the terms and conditions of any finance agreement, though it may involve searching through the small print to realise the full extent of how fees can hit.
The prime example of avoidable fees is banking fees. With an upsurge in banking competition particularly influenced by online banking it is no longer necessary to pay monthly fees to hold a bank account. Many people are simply unaware that fee free banking is now an option, although in many cases, but not all, caveats are applied to an account to qualify the individual for fee free banking. Typical caveats include having a certain monthly sum credited to a checking account, or retaining a current balance of a proscribed amount.
As some checking accounts now also offer interest payments the caveats are not too taxing and help to establish good saving practices. Anyone who pays to hold a savings account should check if a better deal is available with a fee free checking account that pays interest, always of course ensuring that any account is covered by FDIC insurance against bank failure.
Credit card fees are an essential component of credit, yet most can be avoided. The vast majority of credit cards now operate without an annual fee, although those who require secured credit cards will find they are still applied. However, by using secured credit responsibly one can soon move onto unsecured credit without the need for annual fees. A fee is almost always charged to implement a balance transfer but if a zero percent rate can be found then the fee, typically four per cent, can represent a far less expensive option than taking a loan.
Generally though most credit card fees are there to take advantage of consumers opting for less well thought out decisions. A fee is almost always applied to take a credit card cash advance which is never a good choice as interest is charged at a high rate immediately. Fees are charged for foreign transactions but can be avoided by utilizing a card which promotes no foreign exchange fees, or opting to leave credit cards behind when traveling.
Late payments fees can be avoided by meeting all payments on time which is best controlled by establishing automated monthly payments. Whilst a late payment fee is an expensive inconvenience, it pales in comparison to the penalty interest rate which may be applied if payments are made late.
Prescribed fees on loans and mortgages are often unavoidable but care should be taken to understand any penalty fees that may be applied, particularly concerning early redemption of the loan. In the case of mortgage refinancing the fees may work out less expensive than continuing with a higher interest rate mortgage, but never pay fees without first attempting to negotiate.
One of the most brilliant banking cons which have been released onto a gullible public is the advent of prepaid debit and credit cards. Consumers are lining up to pay a fee to spend their own money. Fees are levied to purchase the cards, to load the cards, to withdraw cash from ATM’s, to manage the cards on a monthly basis, and in some cases to close the cards.
Pre-paid cards may offer convenience but they do nothing to establish a credit record and consumers are far better served by a debit card linked to a free checking account. Debit cards allow the consumer to take fee free cash backs when using the card for purchases and generally offer ATM use without charge providing one stays within network.
Anyone who regularly pays banking or credit card fees should review the products they use and consider switching accounts to avoid them, or understand how the common charges can simply be avoided. Paying for the pleasure of handling your money can amount to financial folly when other options are readily available.