Banks are jumping on every little mistake you make with your bank account, debit card and credit cards, and slapping record fees on your slip-ups. Congress and consumers are howling, but the fact remains bank fees are at record highs and rising.
[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2009/images/10/01/flag.dollars.gi.art.jpg caption="One quarter of consumers account for most of the tens of billions of dollars of bank fees, according to an FDIC study."]
A new analysis by Bankrate.com shows these fees are skyrocketing. Bounce a check? Expect an average charge of $29.58. Use your debit card but don't have enough money to draw out of the account? Wham! Bankrate says expect an average overdraft charge of $33.88.
If you are a repeat offender with your debit card, the overdraft charges go up, topping $36. And many banks are shuffling the order of your purchases, so you can get the overdraft charge again and again on the same day. That's the bad news.
Most people pay no fees
The good news – an FDIC study last year found that 75 percent of bank accounts suffer no fees at all. That means most of you out there are balancing your checkbook, not overdrawing your account, and paying your bills on time. The other quarter of consumers account for most of the tens of billions of dollars of bank fees. For them, obviously their finances are tight and they get caught in a vicious cycle.
Consider this: The purchase of a, say, $20 Barbie doll with a debit card puts the consumer over the limit on their account. They are slapped with a $27 overdraft charge. Two weeks later, the consumer pays off the Barbie and the charge in full. The FDIC found the annualized interest rate on that overcharge would be 3,520 percent.
Imagine that same Barbie on a credit card that you've paid late and are carrying a balance. Unless you pay off the card's balance in full right away, Barbie gets more expensive every month when you tack on $39 late penalties and interest rates as high as 30%.
And then there are ATM surcharges. If you use an ATM machine that is not owned by your bank, the fees are rising sharply. Bankrate.com says ATM surcharges rose a whopping 12.6 percent last year to an average $2.22.
Take Back Control
In a way, it feels like the perfect setup: your bank allows you to keep charging even though there isn’t any money in the account, and then they can charge you numerous fees in the same day. They win, you lose. At least two banks have heard the public outcry on this: Bank of America and JP Morgan Chase recently said they will put a cap on overdraft charges.
But Bankrate's senior financial analyst, Greg McBride, says even with regulators and Congress zeroing in on these fees, customers must take control of the situation.
Don't use an out-of-network ATM. It's like throwing money away.
"Note any fees and balance requirements on your account, request a link between your checking and savings accounts, and keep track of the available account balance so that your money stays your own," McBride says.
Bottom line, you can't spend money you don't have. Pay your bills on time, or at least the minimum payment. Do you even know how much money you have in the account? Balance your checkbook like consumers did a generation ago. If you're getting slapped with these fees, better to know to-the-penny how much you have in there, rather than wait for an NSF (non-sufficient funds) alert from the bank.
There are ways you can protect yourself. Many banks automatically enroll you in overdraft protection, so if you spend money you don't have in the account, the bank essentially gives you a short term loan to cover it. In exchange for that emergency loan, they can charge you whatever they want. You can link your savings and checking accounts and pay smaller fees when you bounce a check or overcharge on the debit card. You can also tell your bank to reject any purchases if there isn't money in the account. It's embarrassing, but will save you cash in the end.
And Bankrate says, simply, don't bounce checks. If you have a debit card, don't charge more than you have in the account.
Consumers scream about these huge fees. How can the bailed-out banks justify making so much money by charging us fees on our own money? Screaming isn't going to save you any money. Don't give it to them to take. They are in the business to make money with your money. And they are.