Avoiding overdraft and over limit fees by refusing to opt-in to the new "protection" plans banks are hawking is just the tip of the iceberg when it comes to sparing yourself from dubious fees for financial products and services. Recently, these fees have proliferated, many of them marketed by the very financial institutions that had to roll back their heavy reliance on overdraft and penalty fee revenues after the CARD Act -- Credit Card Accountability, Responsibility and Disclosure Act of 2009 -- was put in place.
"I definitely think we're seeing an uptick right now because card issuers are looking for ways to offset lost revenue," Curtis Arnold, founder of CardRatings.com, told WalletPop. "The CARD Act is costing the industry billions of dollars, and they've got to offset that somewhere." As a result, banks, card issuers and third-party financial services firms are aggressively marketing all sorts of products and services, many of which are a waste of money. Here are five financial fees you shouldn't be paying.
1. Checking account maintenance fees
Despite dire predictions from banks, the new rules didn't lead to the end of free checking. While some bank deposit account regulations have gotten stricter -- generally, when it comes to your minimum balance -- free checking is far from dead.
Richard Barrington, personal finance expert for MoneyRates.com, says that having a higher balance will give you more options when it comes to avoiding maintenance fees. While the conventional wisdom was to keep very little in your checking account and a greater amount in savings where it would earn interest, that advice isn't as important anymore since interest rates are currently so low. "I think what you're going to see is free checking is not going to disappear," says Barrington, "but the conditions under which it's offered might tighten up."
"Banking is a very fragmented market," Barrington adds. What this means for you is that shopping around will often yield a fee-free option out there, such as a deposit account with a local bank or credit union.
Oh, and while we're on the subject of checking accounts, the checks themselves don't have to cost you an arm and a leg, either. Some banks offer plain ones for free as long as you're willing to wait a few weeks for them to arrive. Plenty of third-party companies sell checks, too, so don't feel tied to your bank. If they don't offer you freebies, shop around.
2. Credit card annual fees
Likewise, the CARD Act also didn't lead to issuers slapping on annual fees, despite industry predictions to the contrary. Yes, we've seen more cards with annual fees lately, but a majority still don't make you pay for the privilege of swiping. Curtis Arnold notes that some reward cards have started tacking on annual fees, but he adds that many of the higher priced "concierge" cards offer the same perks that many, lower-cost cards do. (For some real whoppers, check out our round up of worst credit cards.)
If one of your regular credit cards suddenly slaps you with an annual fee, don't be afraid to bargain with them, says Stacy Johnson, president of MoneyTalksNews.com. "I've definitely had fees waived by calling them up and asking them," Johnson says. "If I own a card and they start saying they'll charge an annual fee, I'll tell them I'll close it (unless they waive the fee)." Johnson says if you're a good customer, many of the credit card companies will eat the $50 or $75 to keep you making your everyday purchases with them.
3. Credit card payment insurance
The pitch seems like a good idea: if you can't pay your credit card bills, this insurance will keep you from falling into default. "The reality is, if you look at the payoff on the insurance policies, they pay off pennies on the dollar," says Arnold. This insurance isn't cheap, and there are generally a slew of conditions, caveats and conditions that have to be met before it'll kick in. For instance, the upfront pitch may say your bills will keep getting paid if you become unemployed, but you often have to meet very specific criteria regarding the conditions that led to your unemployment. For instance, was it an involuntary termination or a layoff? If you've just lost your job, do you really want to worry about splitting hairs like that?
What's more, this insurance generally runs out after a fairly short period of time, says Ruth Susswein, deputy director of national priorities for nonprofit group Consumer Action. Given that this recession has been marked by many Americans being out of work for a year or more, short-term protection just doesn't cut it. "We think those tend to be a complete waste of money," Susswein says.
Finally, most of these plans only make your minimum payment for you, while some might only defer your payments, allowing the interest and your overall balance to balloon. If you carry a hefty balance and think the insurance would give you peace of mind, Arnold suggests taking that monthly payment and putting it towards your principal. It's better to pay yourself than the lender, he says.
4. Lost wallet protection
Recently, I was pitched one of these offers. My card issuer wanted me to sign up for a service in which they'd promise to make the phone calls to my other credit cards if I had my wallet or purse stolen. At only a few bucks a month, the price seemed nominal, but Arnold says signing up would have been a mistake.
First of all, he says, wouldn't you want to make those calls yourself to make sure the other cards were canceled in a timely fashion? Plus, how many credit cards do you keep in your wallet anyway? "So it saves you one or two phone calls," Arnold says. "It's a waste." What's more, as anyone who has ever had a wallet snatched can tell you, the real hassle is contacting any merchants with which you've set up automatic payments and giving them the new card numbers (then calling back and making sure the first rep documented the switch).
5. Credit report monitoring
The FTC may have delivered the smack down against Experian's singing free credit report slackers, but pitches for various monitoring services still abound and are pitched by third-party companies as well as issuers and credit bureaus. But it's pricey - often around $15 per month - and you're probably getting many of the same benefits anyway without even realizing it.
"Your card companies are constantly monitoring your accounts for free," Arnold says. This is the reason you'll get a call if you use your card when, for example, you're on vacation in an unfamiliar city or you rack up a number of fairly high charges all in one day. If there's any suspicious activity on your card, the issuer is going to take steps to find out if the charges are legit and cancel your card number if they're not. And you don't have to pay a penny for that.
If you're still concerned that your credit may be compromised, Consumer Action's Susswein suggests checking up on your FICO score yourself. You're allowed by law to get one free credit report every year from each of the three agencies (go to annualcreditreport.com for information), so space your requests out so you can check one every four months or so.
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