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Why You’re Paying More At Your Bank

Has your bank been charging you extra fees on your various accounts? Saddled with losses from rampant foreclosures and credit card delinquencies, banks and credit unions say they have been forced to raise fees and charges in order to maintain a competitive edge in today’s unique economic environment:

“There is an economic storm that has made revenue fall,” said Michael Moebs, an economist and chief executive of Moebs Services, an economic research firm in Lake Bluff, Ill. “Fee income is basically where banks and credit unions can offset both loan- and investment-related losses.”

Fee income has become so onerous to customers that, according to the Washington Post, the Federal Reserve may soon consider regulating it. However, for banks that lend through credit cards, the Fed already has. The New York Times predicted that the Fed’s new credit card rules will eliminate $12 billion dollars in profits this year alone. The Treasury’s stress tests calculated that 19 of the country’s largest banks will suffer $82 billion in credit card losses in just two years.

The Overdraft Fee

The one fee that banks charge more than any other is the overdraft fee. The Post says “A 2008 Federal Deposit Insurance Corp. study found that insufficient funds or overdraft fees made up 74 percent of service charges on deposit accounts.” The fee, which originated as a penalty to teach customers about responsible spending, has turned into a money-making machine for many institutions:

Moebs Services, which provides data to the federal government, estimates that overdraft revenue will reach $38.5 billion this year. The median overdraft fee will be $27.50 this year, up from $25 last year, Moebs said.

“I think when you look at the whole — all of the fees overall — the landscape has changed and that has meant rising costs for our industry,” said Anne Pace, a spokeswoman for Bank of America. “For the bank to continue offering competitive products and services, and making sure we are lending responsibly in the current environment, we have to adjust our prices.”

What You Can Do

The bottom line for consumers is this: most of these fees are avoidable. Especially in terms of overdraft fees, monitoring your accounts, buying only what you know you can afford, and understanding the terms and conditions of your account will help prevent you from being charged. To avoid ATM fees, always withdraw cash from your own bank’s machine. Inquire with your institution to determine if they offer spending alerts. Certain banks send emails or text messages to customers altering them that their account is low. Also consider signing up for an online bank account. Online accounts make it easy to check balances, transfer funds, and pay bills on time.

Have you noticed that your bank has increased their fees and charges?