Budgeting / Credit Cards and Debt / Personal Finance

Fix Your Finances in 30 Days

Day 23: Evaluating Your Expenses – Bank Fees

The vast majority of Americans do their primary banking with one of several very large bank chains. Unfortunately, these large chains are often almost insulting in how they treat their average customers, charging numerous fees and other crazy charges that, over a year, can add up to quite a lot.

Today, we’re going to take a serious look at how your bank (or banks) treats you. Pull out a blank sheet of paper and a copy of your last bank statement. We’re going to see what the fees are costing you – and see if there’s anything you can do about it.

First, copy every single charge that’s not a purchase from your statement to your blank sheet of paper, along with the amount. Leave plenty of white space over to the far right so we can do a few simple calculations. If you earn interest on the account, include that amount as well.

When you’re done, total these charges up (don’t include any earned interest – we’ll deal with that separately) and find out what your account is really costing you a month. The first time I did this, I discovered that I was losing about $25 a month in small fees. Each fee seemed tiny, but when I spent the time to add them up, I was flabbergasted.

Want to surprise yourself even more? Multiply that total by twelve to see how much you’re being dinged for in a year. You should also figure in another 2.5% beyond that total because you could easily earn that much in savings over the course of a year. For me, I saw a total charge of over $300, meaning for the opportunity to use my money for their investments, the bank was charging me $300 in fees a year.

So what can you do? If the charges are appearing in your savings account, look at getting an ING Direct or HSBC Direct savings account. Both are basically charge-free and both earn a stellar interest rate (4.5% and 5.05% respectively). I went from earning about 0.5% on my savings account with occasional fee charges to earning 4.5% with no fee charges ever, putting a lot more money in my pocket.

If the charges are appearing in your checking account, take a look at some local credit unions. Credit unions generally have very strong checking accounts with almost nonexistent fees, though of course your mileage may vary. I found a local credit union that doesn’t charge me any fees at all while offering me all of the same services as my own bank; the only time I’m ever dinged is when I use an ATM in a strange place, and even then the fee is very small. I now probably spend $10 annually in fees versus $300.

If you’re worried about the process of switching primary checking accounts, I’ve written a guide to aid you in this process. It takes less work than you think and over time the savings can be tremendous (if you can save $300 a year like I am, it’s well worth the switch).

Ready? Let’s continue on to the next day.