Unforeseen fees can wreak havoc on your bank account or credit card account. Sometimes, fees are the result of penalties for exceeding a credit limit, making a late payment, using an out of network ATM or bouncing a check. Other times, fees have little or nothing to do with your actions. They are basically penalties for not reading the fine print of your checking account agreement or credit card agreement. Things like inactivity fees, finance charges, annual fees and variable interest rates fall into this category.
Here are some fees to be aware of and ways to avoid having to pay them.
1. ATM fees are a budget killer. If you frequently use cash that is withdrawn via ATM, it is best to find a bank that allows you to do so without paying a fee. Some banks charge for all ATM usage, while others only charge for withdraws made from ATMs that are outside of their network. The first step towards fee-free withdraws is to find a bank that offers free in-network ATM usage. The second step is to make sure that the network is accessible in the places where you will most likely need to withdraw cash (near your home or work). If changing from a bank that has a high ATM fee or a limited network is not an option, you may be better off getting your cash the old-fashion way: via a face-to-face withdraw from the teller at your local bank branch.
2. Know your limits. If you are lucky enough to have a free checking account that doesn’t charge any monthly fees, all you have to do is make sure that you do not overdraft. This means keeping track of your account balance so that you do not spend more than you have (an easy mistake to make if you rely heavily on a debit card to make purchases). If you have an interest-bearing checking account that requires a certain balance, make sure that the account is above that balance at all times.
3. New credit card laws have made fees less damaging to customers. Late payment penalties are limited to $25. Penalties for violating other parts of the credit card agreement are likewise capped at $25. In the unfortunate event that you are hit with a fee, make sure that it is under the cap as is required by federal law.
4. Annual fees. There are plenty of options for people who want credit cards, even rewards credit cards, that have no annual fees. This does not mean that annual fees are always something to be avoided. People who are quite certain that they will earn rewards that will be worth more than the cost of the annual fee might find an annual fee card worthwhile. For most people, however, annual fees are extra expenses that should be avoided.
5. Read the fine print when it comes to making payments. This is where even well-meaning credit card users who consistently make payments on time can slip up. Paying your credit card bill online is generally free and much more convenient than mailing in a check. However, it is important to look at the payment posting details. Most companies say that a payment must be made by a certain time on the due date. This means that you can pay your bill on time only if you pay by a specific time (usually the end of the workday, 5 p.m.; although this can vary from company to company). Also, the due-time is usually tied to a certain time zone. So if you are paying your bill from the West Coast and the due time is 5 p.m. Eastern Standard Time, your payment is due three hours earlier, local time. The simplest way to avoid this issue is to pay your bill a day or two early.