fees posts

Starting this August, if you try to use your debit card to make a purchase without having the funds in your linked checking account, that purchase will be declined. Right in the store. Or the restaurant. No longer will your bank be able to approve the transaction and then hit you with a $35 overdraft fee -- unless you decide that you want to be able to charge without having the funds, and opt in – signing on some dotted line to signal that you want this protection.

Now you have to understand that for the banks, these $35 fees add up to $20 billion in annual revenue. That's why The New York Times reported last week, that your bank is going to try to convince you to join this new party. It will try to raise your level of fear, using words like "protection," and "emergency," and sending letters like the one from Chase quoted in the Times story, which read:

"Your debit card may not work the same way anymore, even if you just made a deposit. Unless we hear from you. If you don't contact us, your everyday debit card transactions that overdraw your account will not be authorized after August 15, 2010 -- even in an emergency."

I, for one, will not be opting in. And I don't believe you should either. Fees like this (which, despite improvements in credit card legislation can still top the amount of your purchase) are outrageous. With the widespread (and typically free) availability of online banking, you ought to be able to keep close enough tabs on the money in your account that you don't overdraw. In most scenarios.

As we've told you previously, new rules about bank overdraft "protection" programs kick in this coming July. The new rules basically say you have to voluntarily sign up to let your bank keep processing debit card transactions even after your account falls into the red and also charge you around $35 each time.

It seems like a no-brainer, right? Why would you sign up for a service like this? Well, because banks have started alarming their customers with direct mail that makes not signing up sound very, very scary. The New York Times has a story that details some of the scare tactics banks are pulling out.

Maybe you've already gotten one of these letters (or more than one!). If not, and if you don't want to click on the Times link, here's the short version: They'll warn you that your debit card might not work. (Of course, it only won't work if you don't have any money in your account.) They use words like "emergency" to make you think of the worst possible scenario, and they underline words and use red ink a lot.

In other words, this is just a lot of hype. There are plenty of other ways you can protect yourself if your account runs low and you have an emergency, points out Kathleen Day, spokesperson for the Center for Responsible Lending.

Previously we talked about Verizon's pricey $350 early termination fee, but Google's Nexus One may have it beat.

That's because both T-Mobile and Google can charge for early cancellation. T-Mobile's ETF is $200 for canceling any time in the first 18 months of its two-year contract. Google can also charge its own $350 "equipment recover fee" for those buyers who cancel their contracts in the first 120 days. Although the phone and T-Mobile have a 14-day risk-free trial, if canceled within three months, users would be expected to pay out $550. The Nexus One without a contract, or an unlocked phone, retails for $529.

A Google spokeswoman said the equipment recover fee is standard practice for third-party resellers.

T-Mobile ETFs drop to $100 after 18 months and down to $50 with less than three months left on a two-year contract.

So, if you want a Nexus One, make sure you intend to keep it for a while or it's obviously not going to be worth the money.

Some of us do it every day: We swipe our debit card then either sign our name or enter a PIN number -- and (voila!) the purchase is done. But little do consumers know that when they sign for a purchase they are costing retailers significantly more than if they enter their PIN -- a fact that could end up costing consumers in the end.

According to a recent New York Times report, banks and retailers are enmeshed in a tug of war regarding debit-based fees. It turns out that when a customer signs for a purchase using their debit card, the retailer pays the bank almost twice as much in "interchange fees" than they would if they had entered a PIN instead. Visa, in particular, has built a dominant position in the debit-card market by steadily increasing the rates it charges merchants when a customer makes a purchase with their debit card. Those fees, which the Times says averages 1% to 3% of each transaction, are then passed along to the bank that issues the card. The fees can really add up: interchange fees account for $45 billion in revenue, the newspaper says.

Friend or foe? Banks hope you'll think of them more kindly this year by offering a slew of new products aimed at making life easier for customers. But that convenience, along with pretty much everything else your bank offers, will likely come at a price. In fact, consumers should expect to spend a lot more on fees this year as banks look to replace the money they expect to lose once new credit card rules go into effect next month.

Come February, the Credit Card Act of 2009 will be put in place. The act is generally considered among personal finance experts to be a good thing for consumers -- for instance, credit cards are going to have to be more upfront about their fees and interest rates, and won't be able to raise interest rates on current balances unless a customer is at least 60 days behind on a payment. But the move is bad news for the banks, which claim that they stand to lose $50 billion a year due to these changes, according to The Wall Street Journal.

An online media maven is urging Americans to switch banks, and she wants her crusade to go viral. On the Huffington Post website, founder Arianna Huffington introduces what she calls the "move your money" campaign. The idea is to get Americans -- all Americans -- to close their accounts at big banks and transplant their personal finances to smaller banks. The budding cause has its own web site, moveyourmoney.info, including a link where you can plug in your zip code and find a list of smaller banks.

Huffington singles out the Big Four banks (that would be Bank of America, Citi, JP Morgan Chase and Wells Fargo) for particular ire, pointing out that they've curbed business lending even since receiving TARP money. She urges Americans to park their money at community banks instead of these TARP-receiving behemoths.

I never did know when to leave well enough alone.

This past summer I had largely stopped getting credit card offers in the mail, having "opted out" earlier in the year. But Bank of America offers continued to get through. I'd held a platinum Visa card with BofA for more than 15 years, so I figured they had better inroads to pestering me about acquiring more credit.

Normally I rip up these offers at the door. I don't need any more credit, thank you. And those checks they send out are just identity-theft nightmares waiting to happen.

But when the California Automobile Association (AAA) sent me an offer for a credit card with 0% APR through April of 2010, I was intrigued. I reckoned I could switch my high-interest Discover card balance to this and pay it off quicker. And Triple-A is an organization that's saved my butt many a time. I called the number to see about opening a card with them. That's when the trouble began.

A reader wrote in about a host of surprises that turned a gift card intended as a nice gesture into a big pain instead.

Visa and other national gift card issuers don't make the terms of the cards a secret. But, let's face it, who sits around reading them? There are a lot of terms and conditions and most people don't know them until they run into them. Unfortunately, that's about the worst time to find out.

As we start to buy gifts for family and friends, we may decide to go the easy route and get a gift card. But think twice before you choose that route. New studies show gift cards are the most popular presents to give and receive, but the hidden costs may outweigh the convenience of the gift. Be sure you give and use these cards correctly.

"Gift cards are easy to give, but they are also easy to forget. If the card has a monthly fee or expiration date, these can become costly little pieces of plastic," Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook told me in an email interview. "Even though gift cards take the hassle out of holiday shopping, you want to use them wisely. It is important to know the terms of the card you are buying."

Leaving your wireless carrier can be an expensive undertaking, and starting Nov. 15 it's about to get more expensive for users of smartphones like the Motorola Droid, Blackberry Storm 2 and other "advanced devices" on the Verizon Wireless network.

While employees have been ordered not to talk to customers about the change, starting on Nov. 15, the Early Termination Fee (ETF) for these devices will increase from $175 to $350. According to a leaked document the higher ETF, "fairly reflects the higher costs associated with offering feature rich advanced devices to customers at attractive prices."

Even though taxpayers bailed out the banks with billions of dollars, banks continue to look for ways to sock it to us.

The latest increases involve just pennies if you look at only one ATM transaction, but the banks make billions given the volume of those transactions. In fact Bankrate.com estimates banks rake in $2 billion per year in ATM charges.

Bankrate.com found that ATM surcharges are up almost 11% over last year. In 2008 the average ATM charge for using another bank's machine was $1.78. In 2009 the average went up to $1.97. That's only 19 cents per transaction and most people don't even notice it, but the banks are making out like bandits on their fees given the volume of ATM transactions everyday.

In addition to this charge for using another bank's ATM, you'll also likely get charged by your own bank. So you're actually charged twice for one transaction. The average for the home bank's charges have also gone up. In 2008 they averaged $1.25, which is up to $1.46 in 2009. That adds another 21 cents to have the convenience of using another bank's ATM.

You didn't complain. So you're going to pay more.

Last week, WalletPop told you about the new $10-each-way increase that the airlines planned to sneak into a few peak days of holiday travel. Originally, that was supposed to fall on only three days: Nov. 29, Jan. 2 and Jan. 3.

But after this charge was announced and relatively few complaints surfaced, the airlines, again practically en masse, felt emboldened enough to roll out the fee on a lot more days, which site FareCompare.com spotted in the course of its routine price checks.

In fact, the big carriers added 10 more days -- an increase of more than 300%, and now equivalent to nearly half of a 30-day month. The extra fees now bleed into holiday periods across the calendar, including Spring Break and Memorial Day. You'll find them on American Airlines, AirTran, Delta, Continental, United, and U.S. Airways.

Everyone's hating on the banks these days for their debit cards with outrageous overdraft fees, but the alternative is no great shakes. Prepaid debit cards have stepped into the market for consumers who can't get a credit card, don't have a bank account and want the convenience (or the status) of whipping out a card.

These cards are branded with the logo of major issuers like Visa, MasterCard and Discover and can be used wherever those cards are accepted. Customers buy the card and load cash onto it. With cute names like Rushcard and offered by friendly-sounding companies like Green Dot Corporation, these cards are pitched as an alternative, a way to avoid those big, bad banks and their overdraft fees.

Do you find yourself a bit disgusted by the amount you spend on ATM fees every month? I know I can't stand to pay $2-$3 just to get to my money, but I'm a huge cheapskate. I'll assume you're as upset by wasting even $10 a month, $120 a year, to withdraw money for expenses that can only be paid in cash, so I'll let you in on my favorite way to avoid ATM fees.

If you bank at a large institution like Chase or Bank of America, you may not feel the need to avoid ATM fees as someone like myself who banks at a local credit union. While there are in-network ATMs that I can visit, I've found a simpler way to get my money without trying to remember which acronym means I don't have to pay a fee.

The trick isn't adding no fee ATMs to your cell phone, nor is it to make sure you're carrying enough cash -- it's to know how late your local Rite Aid, CVS or WalMart is open.

Any purchase made with your debit card at these and many other locations make you eligible for cash back for no additional fee. Since I rarely carry cash and my barber only trades a trim for greenbacks, I make it a point to stop at the Rite Aid next door for a pack of gum and $10 in cash before I get a haircut. I make sure that I'm getting a pack of gum with xylitol so that I'm also preventing cavities and an extra trip to the dentist.

Last month when I was heading out of town on a business trip, I stopped at a supposed in-network ATM and found out I was going to get hit with a $2.50 fee to get my money. So I passed and stopped at WalMart on my way to the conference. I picked up a $1, two-liter of diet coke and got $40 in cash back for no additional charge. When I checked in I dropped my two-liter in a bucket of ice and avoided the $2 diet cokes served in the lounge!

Avoiding ATM fees is simple and cheap to do. But beware! Most gas stations and smaller stores don't offer cash back, or if they do, require a minimum purchase or additional fee.

How do you avoid ATM fees?

Psychologically speaking, the number one doesn't do a whole lot for most people. Do you want ONE extra french fry? Do you have ONE dollar I can borrow? Can you spare ONE minute of your time? See it's hard for most people to get excited about the number ONE, which is sad because it's the loneliest number...

Well what if I told you that there's at least one situation where ONE is not only important, but also as far from lonely as you can get? If you're following along you've probably already guessed that this post is about the power of an additional ONE percent interest, specifically compounding interest.

J.D. Roth of Get Rich Slowly turned me on to this easy-to-understand infographic that shows you the power of one percent and compounding interest when it comes to savings for retirement. If this doesn't help you overcome the psychological "meh" that comes from seeing the number One in an investment brochure, then I'm not sure what will.