The ink on the Credit Card Bill of Rights (officially The Credit Card Accountability, Responsibility and Disclosure Act) is barely dry, but banks have already figured out that they stand to lose big bucks in lost interest and fees from consumers. Not surprisingly, they're looking for ways to make up the dollars. Despite the fact that the new law won't go into effect for nearly seven months, some of these new bank fees and charges are already on the way. Add that to fee increases we see year after year -- on overdrafts and ATM withdrawals, for example -- and there are more than a few things you should be on the look out for.
-- Higher checking account fees. In June, Bank of America increased its monthly account maintenance fee on its MyAccess checking from $5.95 to $8.95 per month. And more banks are bound to follow suit. In particular, customers who don't maintain significant balances should be on the lookout for additional or higher fees. Banks may start requiring you to keep more money in your account; otherwise, you'll get hit with a charge. But this is definitely one fee you can avoid, says Greg McBride, Senior Financial Analyst at Bankrate.com, which does a checking account fee study each fall. "Free checking accounts are still widely available, so you're not held hostage to accounts that have high balance requirements and high monthly service charges." As always, it's all about shopping around.
-- Higher overdraft fees. It is already common to see overdraft fees of $35 to $39 when you spend more than you have in your account. You're then charged interest on the amount of money you've essentially borrowed to cover your purchase. Watch out in particular for two new types of overdraft fees: A tiered overdraft fee, which means that with each successive overdraft, the fees go up. Nine out of the 16 largest banks also have sustained overdraft fees, which means if you don't pay off the overdraft amount and the fee in full, an additional fee gets tacked on. Sometimes it's a per-day fee and sometimes it's a flat fee, but this is something you need to know if your bank participates in the practice.
These overdraft fees -- many of which are charged on debit and ATM transactions -- are particularly annoying because banks do something called "stacking the debt." They program their computers to process withdrawals not in the order that you make them, but by the largest first. So if the largest withdrawal takes you over your funds, you'll then incur overdraft fees on all of the smaller ones. And very few banks, according to the Consumer Federation of America, limit the amount of fees they'll charge you in a single day. So if you swipe at the dry cleaner, the supermarket, the hardware store and the movies in a single day, you could be looking at $140 in fees. Ouch.
What can you do about it? For starters, keep careful tabs on your account balance, and according to Nessa Feddis, Vice President and Senior Counsel for the American Bankers Association, that means not only keeping track online, but by hand as well. "The bank provides the best balance they know about, but they don't necessarily know about transactions that the customer has made until they hit the bank." And that doesn't always happen in real time -- checks, of course, are always delayed, but so are some debit card purchases. One example:
When you eat out, and pay for the cost of the meal and the tip with your card, the bill's total will show up immediately in most cases, but the tip might not register until several days later. For extra protection, McBride advises linking your savings account to your checking, so you're not borrowing from the bank if you overdraft, but from yourself. At most banks, you can also opt out of overdraft protection (many banks automatically enroll you). That way, if you swipe your card and have insufficient funds, you'll be denied. This may be embarrassing, but at least it's not costly.
-- ATM fees. The cost to use an out-of-network ATM is, as always, increasing. Bankrate.com's 2008 Checking study found that the average bank charges $1.97. Your own bank will charge you an additional $1.46, on average, so you get dinged in both directions and can end up paying over $3 in total. This is another fee that can be avoided. The best strategy is being prepared, both by getting enough cash out when you're at your bank's ATM, and by opening your accounts at a bank that is convenient to you. That doesn't mean bigger is better, says McBride. "The big banks don't necessarily have an exclusive advantage here because of large networks. A lot of smaller banks belong to ATM alliances that give customers access to hundreds or thousands of ATMs, free of charge." Smaller banks also tend to be slower to increase fees overall.
-- Balance transfer charges. It used to be that if you wanted to take advantage of a 0 percent credit card balance transfer offer, you paid three percent of the amount transferred and there was generally a cap of $75 or $100. No more. Now you'll pay at least three percent -- and sometimes as much as five
-- and don't expect a cap. All told, these offers may go away completely in the future, says Feddis. "We may see the elimination of this popular offer, because I don't see that there's a business for doing that anymore. The credit card company is basically giving an interest free loan." Keep an eye out for higher cash advance fees -- which are already popping up -- and a resurgence of annual fees as well.
Bottom line: Before you open any account, ask the bank for a copy of the fee account schedule (their list of fees) for a consumer account. They're required to give it to you by law.