Key Takeaways:
- Banks and other retailers make a tidy sum from fees you may not know about.
- Prevention is often the best way to avoid extra costs.
- Knowing your own habits can help you steer clear of added expenses.
As if life as a consumer wasn’t expensive already, it’s not made any easier by the extra amount of money you might be forking over in fees to banks and retailers – sometimes without even knowing it.
Consider that one recent report showed that U.S. consumers pay $2.4 billion every year in credit-card late fees, as well as another $800 million in expedited payments to avoid those late charges.
But that’s nothing compared to the $31 billion that we spend annually on non-sufficient funds (NSF) overdraft fees. In fact, most banks get a healthy contribution to their bottom lines from this fee – in 2015, for example, banks with more than $1 billion in assets reported that 8 percent of their net income came from NSF fee revenue.
Fees from retailers can also pack a punch. Airlines, for example, can entice you with “super-low” fares only to charge you more than $50 for a checked bag.
Fortunately, there are strategies for avoiding the fee frenzy.
Avoiding bank account fees
Many of the fees levied by banks are all too familiar, with most of us getting dinged for overdrafts, falling below account minimums, ATM withdrawals – or even just for having a basic checking account. Most of these charges are understood, but a recent report by Pew Charitable Trust showed many fees – particularly regarding overdrafts – remain hidden. Prevention is often the best strategy to avoid these charges.
- See if your bank has a mobile app that may allow you to get alerts to tell you when your balance is low. Consider using MoneyLion’s free mobile app and connect all of your bank accounts and we’ll alert you of any abnormally high spending and NSF fees across all of your bank accounts.
- Don’t “opt in” to debit card overdraft protection. Your bank can’t charge you an overdraft fee unless you allow them to do so.
- Avoid ATM withdrawal fees by using only your bank’s machines. Otherwise you’ll likely have to pay $2 – $5 to the ATM machine owner AND another $2 – $5 to your bank in fees.
- Consider credit unions or other online virtual banks where free checking is more common.
- If you do get charged a bank fee, call your bank and ask for a refund. Your bank will likely refund your fees as a courtesy, unless you frequently incur NSF and other fees.
Avoiding credit card fees
As with banks, fee disclosures to customers have improved. However, one 2013 report estimated there were more than 233 million hidden credit card charges every year that cost cardholders more than $14 billion annually.
- Credit card fees can be avoided by shopping for no-fee, lower-interest rate options.
- Stop overlimit fees by opting out of plans that let you spend beyond your credit limit.
- Don’t forget you don’t need to pay for your credit report – you can get a free copy of your credit report once a year from each of the three big credit bureaus.
- Use MoneyLion’s free mobile app to track all of your credit card transactions and keep an eye out for any suspicious charges. If you do find a suspicious charge, call your credit card company and dispute it.
Read more about the do’s and don’ts when it comes to credit cards.
Avoiding fees when traveling
Airlines put their flag in the ground by charging for checked baggage, and the fees have only expanded from there. Fees for rebooking flights have gone up, and it’s just about impossible to find anything resembling an in-flight meal for free. With increasing airline consolidation, the consumer has even less leverage to avoid these costs.
- Get a better perspective by including baggage fees when you’re comparing the cost of flights – Southwest, for example, still lets you bring two checked bags on board for free on domestic flights. Do what you can to limit your luggage to carry-on cases.
- For meals, bring aboard food bought in the terminal, assuming that’s a better deal than what you might get on the plane. Or better yet, bring snacks and other easy to eat items from home.
Avoiding cable TV and internet service provider fees
Cable TV providers have built an empire on the “bundle,” making you pay for channels you may not want to get the ones you do. In addition, their near-monopoly status has allowed companies to pass along charges they’re more than happy to be quiet about, including monthly charges for cable boxes, routers, and modems, DVR services, early termination and repair services.
- “Cord-cutting” – i.e. completely getting rid of traditional cable TV subscriptions – by consumers is gaining momentum. Depending on your viewing habits, you might save money by trimming your monthly subscriptions down to just Netflix or Hulu.
- Remember, you should be able to get all of the main network channels like NBC, CBS, and ABC completely free over the air without having to pay a penny.
- Buy your own cable modem instead of renting one from your internet service provider. For less than $100 you can buy the best cable modem available and avoid paying $10 or more per month renting an older model.
- Periodically call your cable TV or internet service provider and ask for a discount. You’d be surprised how simply asking for a better deal can save you money.
Avoiding mobile service fees
Consumer Reports recently estimated that most Americans pay $300 a year more for their phone service than they should. Just like airlines, the fees for many “services” – text message overages, Internet access, early termination – have shot higher. In addition, many companies entice customers to sign up for plans that leave them with large quantities of unused minutes.
- One easy way to cut phone costs is to not pay for more data than you need. Most people can get by with less than 2GB a month, especially if they have access to Wi-Fi at home and at work, two places where most people spend the most time.
- When you’re limited to connecting via a cell network, steer clear of data-intensive activities like video and music streaming, fast-action games and video calls.
- Turn off data roaming when you’re traveling internationally so you don’t inadvertently end up with roaming charges because you may be using apps that run in the background and eat up data.
Avoiding fees for groceries
OK, this isn’t technically a fee, but it’s definitely hidden. Have you noticed how many of the consumer products you regularly buy keep getting smaller? It’s not a mirage – manufacturers regularly reduce the size of packaging – while keeping prices the same – to keep buyers from chasing lower-cost alternatives. They hope you won’t notice, and often you won’t.
Best strategy: read the small print on per-unit prices and buy in bulk whenever possible. Subscription services like Amazon Subscribe & Save also allow you to save upwards of 15% on products that you need on a recurring basis, like soap, toilet paper, personal care items, and more.
Looking for more tips on how to save your hard earned money? Check out our Tips on how to start building your savings post.
