Banks Get Creative With Fees


Banks and fees are as intertwined as peanut butter and jelly or Minneapolis and St. Paul.
All told, banks earn 53% of all of their income from charges on late fees, overdraft fees, loan-origination fees and other surcharges, according to the analytical firm R.K Hammer. That’s up from 35% in 1995.

Bank credit card fees are even worse. Hammer reports that late payment and over-the-limit charges for credit cards rose 80% between 2003 and 2008 – to $19 billion.

But with Congress up in arms over bank and credit card fees, banks are finding new ways to wriggle around the rules and slap new fees on customers.

Take Citigroup (Stock Quote: C) , which recently created a $10 surcharge, more formally known as an “overdraft protection transfer fee”, to move cash from a savings account to a checking account to cover an overdraft. Then there’s PNC Bank (Stock Quote: PNC). Consumers who used their debit card to get a cash advance fee at bank teller windows were met with a new $3 surcharge.

Here are some more onerous, but under-the-radar fees bank customers are starting to see:

Double Indemnity – Bank consumers have grown accustomed to getting whacked by using their ATM card in a different bank’s machine. But how many bank consumers know that banks on both sides of the deal are taking a cut? Maybe that’s why the average ATM fee rose to $1.97 in 2009 – more than double the 89 cent average in 1998, The New York Times (Stock Quote: NYT) reports.

The FDIC Flip – Banks like JP Morgan Chase (Stock Quote: JPM) and Wells Fargo (Stock Quote: WFC) aren’t taking recent Higher Federal Deposit Insurance Corp price increases lying down. Instead, they’re charging small business customers for the increase, in the form of account management fees.

Have Plastic, Will Travel – Both Citibank and PNC now charge debit card account holders $3 every time they use their card overseas. On a week-long trip where customers may use their card 12 times, that adds up to $36 more than some travelers might have figured into their budget.

The “Close Out” – If you open a bank account and try to close in a short period of time (for example, 90 days), banks are increasingly aggressive about charging early close-out fees. “Early termination fees” are a staple of the money market and certificate of deposit markets, so it’s only a matter of time before they’re widely extended into bank savings and checking accounts, too.

Oops, It’s an Overdraft – One of the more teeth-grinding fees that consumers face is the checking account overdraft fee. Much like credit card companies that allow cardholders to exceed their card limit, then charge them a fat fee for doing so, banks in recent years have allowed debit-card holders to use their cards, exceeding their bank account limits, and then charged these cardholders up to $36 per transaction for going over the limit. Congress hasn’t addressed the issue, and banks are sure to lobby against any legislation that changes the overdraft fee structure. But consumer groups are hollering about it and Congress is reportedly looking into the issue.

As banks get more creative about finding new fees to chisel out of consumer’s wallets, bank customers have no recourse but to be more diligent about their financial transactions - especially when it comes to overdrafts and ATM fees.

Otherwise, every day will be a bank holiday for fee-happy financial institutions.

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