Smart Banking: Avoiding Hidden Bank Charges & Other Fees

All the information regarding the underhanded tactics that banks employ may have turned you off. You’re probably thinking you should do away with banks altogether but before you make that decision, know that all you need is to get smart about your banking behavior, and you won’t have to deal with hidden fees or any other sneaky tricks.

Debit Versus Credit

Most banks issue a debit card to customers who open an account and a lot of people use it extensively because it is convenient. However, there are many disadvantages to debit cards that it actually makes more sense to use a credit card.

Banks charge you a fee for in-store purchases and withdrawals from rival ATMs. Plus, if you use your debit card in certain establishments such as a gas station or hotel, your card can be blocked. A certain amount of money (from your account) is frozen, where you won’t have access to that amount for about three days. This is a form of security measure for the merchant. Since they are not sure how much you will actually spend at the establishment, they make an estimate and put a hold on that amount to make sure the expenses will be adequately covered.

Keeping track of debit card purchases is a little trickier so the tendency to overspend is higher. If you inadvertently spend more than what your account contains, banks offer a clever little service called courtesy overdraft protection. Courtesy overdraft fees are exorbitant and the last thing you want is to have these fees pile up

Speaking of Overdrafts

If you opened a checking account, do away with overdraft programs altogether. Overdraft fees are typically pegged at $20 t0 $40 yearly and some banks will charge you a small fee each time you make use of an overdraft.

Courtesy overdrafts are even more of a no-no. Some banks charge as much as $40 per transaction. They also charge a daily fee for as long as your account has negative balance.

It helps to know as well that checks are usually cleared very quickly while banks can take a few days before they credit deposits to your account. What does this mean? You should be careful when issuing checks and make sure your account has more than enough to cover the amount. You might be thinking that you can deposit more money later but your check might have already been encashed before your deposit has been credited. This will result in an overdraft.

Credit Union Versus Banks

If you find banks might not be the establishment to keep your money in, consider joining a credit union. A credit union has some significant advantages over a bank. Credit unions typically charge lower fees and offer higher interest rates on your savings essentially because they non-profit organizations. Also, the fact that they are mostly tax-exempt might also be a factor.

Credit cards from credit unions also tend to have friendlier features. If you are late in payment once, for instance, you won’t be charged additional interest. Also, most credit unions don’t require you to pay annual credit card fees.